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| Author: | Kanbur, R. Pirttilä, J, Tuomala, M. |
| Title: | Moral hazard, income taxation and prospect theory |
| Journal: | Scandinavian Journal of Economics
2008 : VOL. 110: 2, p. 321-337 |
| Index terms: | income tax moral hazard uncertainty |
| Language: | eng |
| Abstract: | The standard theory of optimal income taxation under uncertainty has been developed under the assumption that individuals maximize expected utility. However, prospect theory has now been established as an alternative model of individual behaviour, with empirical support. The article explores the theory of optimal income taxation under uncertainty when individuals behave according to the tenets of prospect theory. It is seen that many of the standard results are modified in interesting ways. |
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