Consider again examples 9.2 and 9.3 , and once again assume that there are two states of
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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 VLj , VHj and nL, nH. Denote the probabilities for these by PLv and PHv = 1– PLv and PLn and respectively. Assume the random variables are all independent.
(a) For given firm-specific tax rates τj determine the firms’ equilibrium choices lj (vkj) 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
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