When is Knowledge Acquisition Socially Beneficial in the Laffont–Tirole Regulatory Framework?

Author:

Zimper Alexander1ORCID,Molefinyane Mpoifeng1

Affiliation:

1. Department of Economics , University of Pretoria , Private Bag X20 , Hatfield 0028 , South Africa

Abstract

Abstract The Laffont–Tirole regulator observes the accounting costs of a firm but she can neither observe its true cost-type nor its chosen effort level. This paper considers a Laffont–Tirole regulator who could employ an expert to obtain better, albeit not perfect, knowledge about the firm’s true cost type. Both the welfare gains through superior allocations from better knowledge but also the knowledge acquisition costs increase in the ‘marginal deadweight losses from taxes’ parameter λ ≥ 0. We derive a closed-form expression of the overall welfare benefits from knowledge acquisition as a function in λ. We characterize parameter conditions such that knowledge acquisition could improve social welfare in dependence on the value of λ. For this case we show that knowledge acquisition strictly increases social welfare if and only if λ falls into the interval (λ *, ∞) whereby we present a sharp characterization of the critical threshold-value λ * ≥ 0. In other words, information acquisition through a regulator only increases welfare for economies with comparatively high deadweight losses from taxation whereas welfare is decreased whenever these deadweight losses are low.

Publisher

Walter de Gruyter GmbH

Subject

General Economics, Econometrics and Finance

同舟云学术

1.学者识别学者识别

2.学术分析学术分析

3.人才评估人才评估

"同舟云学术"是以全球学者为主线,采集、加工和组织学术论文而形成的新型学术文献查询和分析系统,可以对全球学者进行文献检索和人才价值评估。用户可以通过关注某些学科领域的顶尖人物而持续追踪该领域的学科进展和研究前沿。经过近期的数据扩容,当前同舟云学术共收录了国内外主流学术期刊6万余种,收集的期刊论文及会议论文总量共计约1.5亿篇,并以每天添加12000余篇中外论文的速度递增。我们也可以为用户提供个性化、定制化的学者数据。欢迎来电咨询!咨询电话:010-8811{复制后删除}0370

www.globalauthorid.com

TOP

Copyright © 2019-2024 北京同舟云网络信息技术有限公司
京公网安备11010802033243号  京ICP备18003416号-3