# Consider again examples 9.2 and 9.3 , and once again assume that there are two states of

## Question:

Consider again examples 9.2 and 9.3 , and once again assume that there are two states of the world for each random variable, denoted by V^{L}_{j , V}^{H}_{j and n}^{L}_{, n}^{H}_{. }Denote the probabilities for these by P^{L}_{v }and P^{H}_{v }= 1– P^{L}_{v }and P^{L}_{n }and respectively. Assume the random variables are all independent.

**(a)** For given firm-specific tax rates τ_{j} determine the firms’ equilibrium choices l_{j }(v^{k}_{j}) for k=L,H.

**(b)** Determine the optimal firm-specific tax rates.

**(c)** Derive a formula for the second-best optimal uniform tax rate.

**Example 9.2**

**Example 9.3**

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**Related Book For**

## A Course In Environmental Economics

**ISBN:** 9781316866818

1st Edition

**Authors:** Daniel J Phaneuf, Till Requate