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Optimal domestic redistribution and multinational monopoly
Author(s) -
Hamilton Jonathan H.,
Slutsky Steven M.
Publication year - 2021
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12990
Subject(s) - economics , monopoly , microeconomics , social planner , redistribution (election) , planner , multinational corporation , redistribution of income and wealth , social welfare , public economics , public good , finance , programming language , politics , political science , computer science , law
Abstract Having a monopoly that is not owned domestically affects a country's income redistribution policies. Assume the government uses lump‐sum taxes to redistribute but cannot regulate the monopolist's price. In many relevant circumstances, a social planner would not equate social marginal utilities of income across individuals. Thus, using aggregate welfare functions as the preferences of a single representative consumer is valid only under restrictive circumstances. The monopolist always prefers to set price before the social planner chooses transfers, while the social planner may not have a first‐mover advantage. Under endogenous timing of their decisions, the government never moves before the monopolist.