Optimal Nonlinear Policies for Non-Utilitarian Motives

Abstract

This paper studies optimization by a principal, e.g. a government or a firm, whose choice among social alternatives is constrained to those it can decentralize, as in the nonlinear taxation literature, but whose ranking of these alternative equilibria is not constrained to be of any special form, such as utilitarian or profit-maximising. Accordingly, we shall define welfare directly on the various quantities arising in the economy, on the consumption vectors of consumers in full detail, without necessarily processing this information in any particular way.