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Randomization, revelation, and redistribution in a Lerner world

Author

Listed:
  • Uri Possen

    (Department of Economics, Cornell University, Ithaca, NY 14853-7601, USA)

  • Pierre Pestieau

    (CREPP, University of Liege, Boulevard du Rectorat, 7 , 4000 Liege, BELGIUM and CORE, CEPR and Delta)

  • Steven Slutsky

    (Department of Economics, University of Florida, Gainesville, FL 32611-7140, USA)

Abstract

If total social income is fixed and a social planner is uninformed of the utility representations of different individuals, then Lerner showed that the social optimum is to equally distribute income across individuals. We show that the planner by the use of randomization can in some circumstances induce individuals to reveal information about the curvature of their utility functions and then use the information to move away from equality on average. However, whether this is optimal depends in part on unobservable beliefs of the planner. These may be viewed as an aspect of the planner's ethical judgements or as something entirely arbitrary.

Suggested Citation

  • Uri Possen & Pierre Pestieau & Steven Slutsky, 2002. "Randomization, revelation, and redistribution in a Lerner world," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 20(3), pages 539-553.
    • Handle: RePEc:spr:joecth:v:20:y:2002:i:3:p:539-553
    Note: Received: January 11, 2000; revised version: June 26, 2001
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    Citations

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    Cited by:

    1. Grodner, Andrew & Kniesner, Thomas J. & Bishop, John A., 2011. "Social Interactions in the Labor Market," Foundations and Trends(R) in Microeconomics, now publishers, vol. 6(4), pages 265-366, September.
    2. Gauthier, Stéphane & Laroque, Guy, 2017. "Redistribution by means of lotteries," Journal of Economic Theory, Elsevier, vol. 169(C), pages 707-716.
    3. Grodner, Andrew & Kniesner, Thomas J., 2008. "Distribution of Wealth and Interdependent Preferences," IZA Discussion Papers 3684, Institute of Labor Economics (IZA).
    4. Gauthier, Stéphane & Laroque, Guy, 2017. "Redistribution by means of lotteries," Journal of Economic Theory, Elsevier, vol. 169(C), pages 707-716.

    More about this item

    Keywords

    Randomization; Redistribution; Probabilistic egalitarianism.;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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