The Government May Want to Encourage Price-Discrimination by Income

David Reinstein ()

Economics Discussion Papers from University of Essex, Department of Economics

Abstract: Governments have unique private information about individual incomes. This suggests a new policy tool: consumers can be offered an “OpportunityCard” certifying their income, and firms can be allowed to price-discriminate on this basis. This is politically appealing: it should reduce consumption inequality through the use of market mechanisms, rather than through taxes and spending. However, the efficiency consequences are theoretically ambiguous. I propose a pilot field experiment to provide empirical evidence on output, efficiency, and practical issues.

Date: 2015
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