| Summary: | A model is developed to investigate price-mediated, or partially decentralized, welfare policy in situations where the government lacks full information about consumer types. The work of Blackorby and Donaldson, who demonstrated the importance of in-kind transfers in a world where self-selection of allocations is an efficiency-enhancing mechanism, is extended and reinforced to show how second-best allocations can be achieved through limited lump-sum or per-unit subsidies for particular goods. In addition, Blackorby and Donaldson's model is applied to the case of more and less infirm people to show that allocations could be implemented through income-tax schemes combined with in-kind lump-sum subsidies that are available only if consumption equals or exceeds a particular amount.
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