Abstract
Bunching is said to occur if individuals with different characteristics receive the same commodity bundle. This article analyzes bunching in a finite population optimal nonlinear income tax problem. Several easily-computed sufficient conditions for the optimality of particular bunching patterns as well as a simple necessary and sufficient condition for the optimal allocation to exhibit no bunching are presented. In addition, a characterization of the optimal allocation is provided. Is is shown that the bunching pattern obtained by S. Lollivier and J.-C. Rochet is a consequence of a convexity condition which is automatically satisfied in their continuum model but which is not generally satisfied in a finite model.
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