900 research outputs found
Equity and Effectiveness of Optimal Taxation in Contests under an All-Pay Auction
The means of contest design may include differential taxation of the prize. This paper establishes that, given a revenue-maximizing contest designer who faces a balanced-budget constraint, the optimal taxation scheme corresponding to an all-pay auction is appealing in two senses. First, it ensures exceptional equitable final prize valuations. Second, it is effective; it yields total contestantsâ efforts that are larger than those obtained under almost any Tullock-type lottery. Furthermore, when a budget surplus is allowed, the superiority of optimal taxation under the APA is preserved in terms of equity and effectiveness relative to optimal taxation under any contest success function.contest design, revenue maximization, balanced-budget constraint, budget surplus, optimal differential taxation, endogenous stakes, all-pay auction, lottery
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Managerial compensation and shareholder wealth consequences of white knight behavior.
This dissertation investigates the manager motivations involved in the participation of White Knights (WKs) in corporate control contests. The three features of WK bids, viz. (i) it is a subsequent bid, (ii) it is a friendly bid and (iii) it follows a hostile bid, combine uniquely to provide the context for varying bidding motivations of WK managers relative to the hostile bidders (HBs). An analysis of the sequence of bidding in these contests reveals a category called HHW WKs who make their bid after two consecutive bids by the HB, and tend to take relatively more time in doing so. The non-HHW WKs make their bid in relative haste after the first HB bid. Overpayments by WKs, for which statistical evidence is documented, are observed to be much more pervasive, and of considerably greater economic magnitudes, for non-HHW WKs. The managers of HHW WKs are thus more likely to be firm value maximizers; any observed overpayments could be the result of hubris or the winner\u27s curse. However, the managers of non-HHW WKs may not be maximizing firm value through their bids, implying an absence of proper ex-ante incentive alignments for minimizing agency conflicts. These managers may thus have a lower proportion of annual expected income from their separate holdings of stock and stock options relative to their annual cash compensation (defined as variables COM and OP respectively). An examination of the structure of compensation packages of managers reveals that COM is lower for non-HHW WKs as compared to HHW WKs. OP is unable to directly distinguish between non-HHW WKs and HHW WKs. Yet, OP (as well as COM) are lower for non-HHW WKs relative to HBs. Further, neither COM nor OP is able to differentiate between HHW WKs and HBs. Thus, if HBs are considered as firm value maximizers, then HHW WKs are likely to be governed by similar motivations. In contrast, size maximization goals leading to higher proportions of cash compensation for their managers may dominate the acquisition activity of non-HHW WKs. External monitoring to limit agency conflicts, as proxied by relative debt levels, is also lower for non-HHW WKs
The Nexus Between Gambling Tax and the Gross Domestic Product in Kenya
This study seeks to assess the relationship between the tax rates imposed on each sub-sector, i.e. betting tax, lottery tax, gaming tax and prize competition tax, and the gross domestic product. The target population for this study include all licenced gambling operators in Kenya. Secondary data was obtained via request from the relevant authorities in Kenya. Regression analysis was performed on the data to model the relationship between the variables. It was found that an increase in the monetary amount of gambling taxes levied from winning punters and gamers would likely lead to a decrease in the GDP, whereas the same increase in the monetary amount of gambling taxes levied from winning lottery players and monetary prize winners would likely lead to an increase in the GDP. The study recommends that a moderate gambling tax regime should be imposed on all other operators except lotteries. Lottery winnings and prize competition winnings tax rates should be increased whereas betting winnings tax rates should be decreased
Theoretical Perspectives on Resource Tax Design
The importance and complexity of petroleum and hard minerals operations is matched by the importance and complexity of finding effective ways to tax them. Many of these challenges arise in other activities too (exhaustibility of deposits being the main exception), but they take such extreme form in relation to resources as to have led to a proliferation of creative instruments and analytical methods. This paper reviews the challenges for tax policy in dealing with the resource sector, the principal instruments used, and some of the central design issues.natural resources, resource taxation, non-renewable resources
Public Economics and Startup Entrepreneurs
This paper surveys the various forms of market failure that can arise when innovating entrepreneurs consider entering an industry, and outlines possible implications for public policy. Externalities can arise from entrepreneurial activities such as spillover benefits from new innovations and spillover costs on incumbent firms. New entrepreneurs can also face various barriers to entry, either natural ones or those created by incumbent firms or government policy. They may also face problems in obtaining credit at efficient terms if there are information asymmetries in markets for either loan or equity finance. Finally, asymmetric information may also plague new firms in the hiring of workers. These various inefficiencies are of contradictory sign, some calling for an incentive to startup firms and other for the opposite. Thus, public policy is ambiguous and depends on the circumstances at hand.
Prize Sharing in Collective Contests
The characteristics of endogenously determined sharing rules and the group-size paradox are studied in a model of group contest with the following features: (i) The prize has mixed private-public good characteristics. (ii) Groups can differ in marginal cost of effort and their membership size. (iii) In each group the members decide how much effort to put without observing the sharing rules of the other groups. It is shown that endogenous determination of group sharing rules completely eliminates the group-size paradox, i.e. a larger group always attains a higher winning probability than a smaller group, unless the prize is purely private. In addition, an interesting pattern of equilibrium group sharing rules is revealed: the group attaining the lower winning probability is the one choosing the rule giving higher incentives to the members.collective contest, mixed public-good prize, endogenous sharing rules, the group-size paradox
Why does Environmental Policy in Representative Democracies Tend to be Inadequate? A Preliminary Public Choice Analysis
There is a widespread consensus among the most important players in developed countries (voters, politicians, producers, traditional and green interest groups and bureaucracies) that a shift towards an eco-social market economy is essential for sustainable growth. Nevertheless, market-based instruments have not been implemented satisfactorily in environmental policy yet. To identify the reasons for this insufficient implementation in the past decade the Public Choice theory is used. The playersâ behavior is analyzed in order to show that their incentives for implementing market-based instruments in environmental policy instead of command-and-control measures are surprisingly weak. Knowing the obstacles to implementing market-based instruments provides valuable insights into how to overcome them.public choice and environmental policies, sustainability, voters, government, interest groups, tradeable permits, green taxes
Public-Private Partnership and Schooling Outcomes across Countries
The paper provides a comparative analysis of the association between student achievement and public-private partnerships (PPPs) in schooling across countries. Student-level data from the PISA international achievement test provides information on the public-private character of both operation and funding of each tested school. Across countries, public operation is associated with lower student outcomes, but public funding with better student outcomes. Thus, systems of PPPs that combine private operation with public funding do best among all possible operation-funding combinations, while PPPs that combine public operation with private funding do worst. The advantage of private operation is particularly strong in countries with large shares of public funding.
What Really Matters in Spectrum Allocation Design
Since initiated in the U.S. in July 1994, auctions have replaced "beauty contests" in the assignment of wireless licenses in many countries. Economists have been involved in constructing the competitive bidding mechanisms chosen, and have devoted considerable analysis to the problems involved. Generally, auction methods have been evaluated according to the receipts generated; social gains resulting from the displacement of activity-distorting taxes has motivated the welfare analysis. Yet, policies widely advocated by economists to intensify license bidding , such as reservation prices or bidding credits for "weak"' bidders , may impose deadweight losses that dominate revenue raising efficiencies. Yet, retail market effects are largely excluded from cost-benefit calculations of rules to assign licenses. This paper reviews a number of case studies suggesting that economic analysis is most usefully focused on consumer welfare in wireless service markets, the outputs resulting from license use. Econometric evidence from mobile phone markets in twenty-nine countries suggests that auctions do not lower prices or increase usage, while liberalization, increased spectrum allocations and more competitive markets -- produces such pro-consumer results. We use simulations to compare the net social benefits of liberalization against policies suggested in the auction literature to enhance license bids. We argue that increases in bandwidth and competitiveness produce consumer benefits that generally dominate social gains from rent extraction via wireless license auctions.
Equal rules or equal opportunities? Demystifying level playing field
Pleas for a level playing field, for instance in international trade, are often not well-founded. This is because it is not exactly clear what a 'level playing field' means. But even if it would be clear what the plea would imply, a level playing field is not always desirable from an economic perspective. To clarify the meaning of 'a level playing field' we introduce two specifications of the concept. First, a rules-based level playing field, which means that all firms in a market are treated the same in equal circumstances with regard to legislation, taxes, subsidies etcetera. Second, an outcome-based level playing field, which means that all firms in a market have the same expected profit. This means that, in case firms are heterogeneous, the government compensates the disadvantaged firms (for instance with subsidies). The first conclusion in the report is that a rules-based level playing field is desirable, although there are reasons to deviate from this assumption. The second conclusion is that it is never desirable to pursue a fully outcome-based level playing field, but that it may be desirable to level the playing field to a certain extent in the case of market failure. In case of market failure it is preferable to use symmetric rules (equal for all firms), in stead of asymmetric rules (favouring some firms). The report introduces a framework with questions that can help policymakers analyse level playing field issues. The framework makes clear that in general one cannot tellïżœwhether a plea for a 'level playing field' is justified or not. It is necessary to focus on the policy issues hidden behind the plea, i.e. policy issues concerning market failure, dynamic efficiency, redistribution of income and differences in preferences between countries.
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