This paper shows that when uncertainty is taken into account explicitly, taxation of corporate income can leave corporate investment incentives, and individual savings incentives, basically unaffected, in spite of the sizable tax revenues collected. In some plausible situations, such taxes can increase efficiency. The explanation for these surprising results is that the government, by taxing capital income, absorbs a certain fraction of both the expected return and the uncertainty in the return. While investors as a result receive a lower expected return, they also bear less risk when they invest, and these two effects are largely offsetting.

In this paper we adopt the CES model of product differentiation for the downstream stage of the industry. With an upstream monopolist we first show that resale price maintenance is equivalent to forward integration and that both increase profits. Then we demonstrate that forward integration by an upstream monopolist will reduce welfare for the industry. Prices fall with forward integration, but the integrating firm contracts the number of downstream subsidiaries so drastically that the reduced diversity more than offsets the gains from lower prices.

Journal Article Reward Structures in a Planned Economy: Some Difficulties Get access H. S. E. Gravelle H. S. E. Gravelle Queen Mary College, University of London Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 100, Issue 1, February 1985, Pages 271–278, https://doi.org/10.2307/1885746 Published: 01 February 1985

Olivier J. Blanchard, Eric S. Maskin, Lawrence H. Summers; Manifesto, The Quarterly Journal of Economics, Volume 100, Issue 1, 1 February 1985, Pages iii,

Modern neoclassical business cycle theories posit that the observed fluctuations in consumption and employment correspond to decisions of an optimizing representative individual. We estimate three first-order conditions that represent three tradeoffs faced by such an optimizing individual. He can trade off present for future consumption, present for future leisure, and present consumption for present leisure. The aggregate U. S. data lend no support to this model. The overidentifying restrictions are rejected, and the estimated utility function is often convex. Even when it is concave, the estimates imply that either consumption or leisure is an inferior good.

This paper develops a method for inferring from observations on a group's collective expenditure whether a cooperative or competitive resource allocation process, or some mixture of the two, has occurred. The method will be applicable to a variety of situations from small collectives such as the family or groupings of nations collaborating in security or trade alliances, to collectives with large numbers. This method will be useful for identifying (1) whether observed outcomes have been efficient, (2) whether costs have been shared equitably, (3) what is the form of collaboration or competition, and (4) what is the degree of “publicness” of the collective good.

Price-fixing rings with market sharing arrangements are an empirically important category of cartel phenomena. This paper develops a cartel model in which side payments are not allowed and firms engage in negotiations to fix price and market shares under conditions of demand uncertainty. The negotiated agreement reflects cost averaging and yields a solution on the contract curve. The price determined by unit cost averaging ensures acceptable profits for the firms while the risks associated with slack demand and excess capacity are spread across the firms in accordance with the division of the market. The model's predictions are consistent with available empirical evidence.