On existence of pure strategy equilibrium with endogenous income

Description

It is well known that in a voting-over-income-taxation game, no pure-strategy equilibrium exists when voters’ incomes are exogenous—that is, when individuals make only consumption choices. I show that in an environment with endogenous income—where individuals make labor–leisure choices in addition to consumption decisions—and where candidates propose marginally progressive taxes, a pure-strategy equilibrium tax schedule can exist.

Publication Date

1-1-2010

Keywords

Indifference curve, Condorcet winner, Pure strategy equilibrium, Labor choice, Exogenous income

Conference

Eastern Economic Association Meeting, 26-28 February, 2010, Philadelphia

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