A Note on the Symmetry between Bribes and Charges

Abstract

It has been argued that within a dynamic setting, without complete information, the tax and bribe methods of correcting externalities give asymmetrical results. A model is presented which shows that the bribe alternative under such conditions yields optimal results, whereas the tax alternative does not. This conclusion is the opposite of conclusions drawn from other models advanced in the literature on the subject. It cannot be said that within such a setting one policy is better than the other, since all such conclusions depend upon the particular characteristics of each model.

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