Publisher:
School of Economics and Finance, Victoria University of Wellington, Wellington, N.Z
This paper studies implementation of the social optimum in a model of habit formation. We consider taxes that address inefciencies due to negative consumption externalities, imperfect competition, and self-control problems. Our contributions are to:...
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ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
Signature:
VS 241 (2011,9)
Inter-library loan:
No inter-library loan
This paper studies implementation of the social optimum in a model of habit formation. We consider taxes that address inefciencies due to negative consumption externalities, imperfect competition, and self-control problems. Our contributions are to: i) account for producers market power; and ii) require implementation to be robust and time consistent. Together, these features can imply signifcantly lower taxes. We provide a general characterization of the optimal tax rule and illustrate it with two examples. dynamic externalities, internalities, addiction, optimal taxation, time consistent implementation
