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Redistribution by Means of Lotteries

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Abstract
A government designs transfers to agents in the absence of information on their preferences. The second-best allocation is equal sharing among citizens when the awards are deterministic. We provide a necessary and sufficient condition under which lotteries improve upon the egalitarian outcome. The condition requires that the citizens with large social weights have low risk aversion, and that the left tail of the distribution of risk aversion be sufficiently dispersed

Suggested Citation

  • Stéphane Gauthier & Guy Laroque, 2015. "Redistribution by Means of Lotteries," Documents de travail du Centre d'Economie de la Sorbonne 15005, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    • Handle: RePEc:mse:cesdoc:15005
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    References listed on IDEAS

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    1. 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.
    2. Gauthier, Stéphane & Laroque, Guy, 2014. "On the value of randomization," Journal of Economic Theory, Elsevier, vol. 151(C), pages 493-507.
    3. Frøystein Gjesdal, 1982. "Information and Incentives: The Agency Information Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(3), pages 373-390.
    4. Mauro Guillén & Adrian Tschoegl, 2002. "Banking on Gambling: Banks and Lottery-Linked Deposit Accounts," Journal of Financial Services Research, Springer;Western Finance Association, vol. 21(3), pages 219-231, June.
    5. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
    6. Peter Tufano, 2008. "Saving whilst Gambling: An Empirical Analysis of UK Premium Bonds," American Economic Review, American Economic Association, vol. 98(2), pages 321-326, May.
    7. John Morgan, 2000. "Financing Public Goods by Means of Lotteries," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(4), pages 761-784.
    8. repec:hal:pseose:hal-00969344 is not listed on IDEAS
    9. PESTIEAU, Pierre & POSSEN, Uri & SLUTSKY, Steven, 2002. "Randomization, revelation, and redistribution in a Lerner world," LIDAM Reprints CORE 1574, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
    11. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    More about this item

    Keywords

    Lerner egalitarianism; random redistribution; incentives; qualified constraints;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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