Governments have unique private information about individual incomes. This suggests a new policy tool: consumers can be offered an “OpportunityCard” certifying their income, and firms can be allowed to price discriminate on this basis. This is politically appealing: it should reduce consumption inequality through the use of market mechanisms, rather than through taxes and spending. However, the efficiency consequences are theoretically ambiguous. I propose a pilot field experiment to provide empirical evidence on output, efficiency, and practical issues.
- Brief ‘policy’ discussion paper
- Simpler version: Let them Eat OpportunityCards