On the value of randomization

Stephane Gauthier and Guy Laroque

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: An optimal contract may involve randomization when the agents differ in their attitudes towards risk, so that randomization enables the principal to relax the incentive constraints. The paper provides a necessary and sufficient condition for local random deviations to be welfare improving in a neighborhood of a nonrandom optimum

Keywords: Random taxation; stochastic contract; second best; tax evasion (search for similar items in EconPapers)
JEL-codes: H21 H23 H26 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2011-10, Revised 2012-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Economic Theory, 2014, 151, pp.493-507

Downloads: (external link)
https://shs.hal.science/halshs-00639834 (application/pdf)
https://doi.org/10.1016/j.jet.2014.02.006

Related works:
Journal Article: On the value of randomization (2014)
Working Paper: On the value of randomization (2014)
Working Paper: On the value of randomization (2014)
Working Paper: On the value of randomization (2014)
Working Paper: On the value of randomization (2014)
Working Paper: On the value of randomization (2011)
Working Paper: On the value of randomization (2011)
Working Paper: On the value of randomization (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:11062r

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