Coercion, Rationality and Public Goods
Project funded by own resources
Project title Coercion, Rationality and Public Goods
Principal Investigator(s) Hintermann, Beat
Organisation / Research unit Departement Wirtschaftswissenschaften / Public Economics / Public Finance (Hintermann)
Project start 01.02.2010
Probable end 01.12.2014
Status Completed
Abstract

We develop a theory of social planning with a concern for economic coercion, which we define as the difference between consumers' actual utility, and the "counterfactual" utility they expect to obtain if they were able to set policy themselves. Reasons to limit economic coercion include protecting minorities, preventing disenfranchised groups from engaging in socially costly behavior, or political economy considerations. If consumers are fully rational, we show that limiting coercion is equivalent to placing more welfare weight on coerced consumers at the expense of others. If, however, consumers' rationality is bounded, counterfactual utility becomes endogenous to current policy, and the welfare loss associated with limiting coercion increases. We set up a numerical version of our model and find that the bias-related welfare loss can be substantial.

Keywords Coercion, taxation, public goods, rationality, behavioral public economics
Financed by University funds

Published results ()

  ID Autor(en) Titel ISSN / ISBN Erschienen in Art der Publikation
3653019  Hintermann, Beat; Rutherford, Thomas F.  Social planning and coercion under bounded rationality with an application to environmental policy  0927-5940 ; 1573-6970  International tax and public finance  Publication: JournalArticle (Originalarbeit in einer wissenschaftlichen Zeitschrift) 

Cooperations ()

  ID Kreditinhaber Kooperationspartner Institution Laufzeit - von Laufzeit - bis
978094  Hintermann, Beat  Rutherford, Thomas, Professor  University of Wisconsin at Madison  01.02.2010  31.12.2013 
   

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