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Subsidy Design and Asymmetric Information: Wealth versus Benefits

Research output: Contribution to journalArticle

Simona Grassi, Ching to Albert Ma

Original languageEnglish
Pages (from-to)49-72
JournalJOURNAL OF ECONOMICS
Volume101
Publication statusPublished - 2010

King's Authors

Abstract

A government would like to subsidize an indivisible good. Consumers’
valuations of the good vary according to their wealth and benefits from the good.
A subsidy scheme may be based on consumers’ wealth or benefit information. We
translate a wealth-based policy to a benefit-based policy, and vice versa, and give
a necessary and sufficient condition for the pair of policies to implement the same
assignment: consumers choose to purchase the good under the wealth-based policy
if and only if they choose to do so under the translated benefit-based policy. General taxation allows equivalent policies to require the same budget.

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