Timeline for Pigouvian tax with general utility function
Current License: CC BY-SA 4.0
3 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Aug 14, 2021 at 22:00 | vote | accept | dotpad | ||
| Aug 14, 2021 at 16:40 | comment | added | dotpad | If I were to consider allocating property rights to person b. Let $z$ be the rights to impose this external cost on person b, and $p_z$ be the price of such rights. Then person a's problem is $$\max_{x_a,\ y_a} \ u_a(x_a,y_a)$$ s.t. \begin{align*} p_xx_a+p_yy_a+p_zz_a&=e_a,\\ z_a&=y_a. \end{align*} In equilibrium, person a's and person b's first-order conditions are equal to $\frac{p_z}{p_x}$. When I rearrange to get a condition similar to that for social maximisation, I find that $$p_z=p_x\frac{-\partial u_b/\partial y_a}{\partial u_b/\partial x_b}.$$ Is this the same as $t$ above? | |
| Aug 12, 2021 at 19:10 | history | answered | tdm | CC BY-SA 4.0 |