Journal Article10.3982/ECTA10739
Comment on “Commitment vs. Flexibility”
Attila Ambrus,Gregory Egorov +1 more
TL;DR: This article showed that money-burning can be part of the ex ante optimal contract when there are two states and that money burning can be imposed at the top (in the highest liquidity shock state), even when there is a continuum of states.
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Abstract: This comment corrects two results in the 2006 Econometrica paper by Amador, Werning, and Angeletos (AWA), that features a model in which individuals face a trade-off between flexibility and commitment. First, in contrast to Proposition 1 in AWA, we show that money-burning can be part of the ex ante optimal contract when there are two states. Second, in contrast to Proposition 2 in AWA, we show that money-burning can be imposed at the top (in the highest liquidity shock state), even when there is a continuum of states. We provide corrected versions of the above results. [PUBLICATION ABSTRACT]
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Citations
Dynamic Delegation of Experimentation
TL;DR: In this paper, a dynamic relationship where a principal delegate experimentation to an agent is studied and the optimal mechanism is a cutoff rule in the belief space: the cutoff gives pessimistic types total freedom but curtails optimistic types' behavior.
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Which Early Withdrawal Penalty Attracts the Most Deposits to a Commitment Savings Account
John Beshears,James J. Choi,Christopher Harris,David Laibson,Brigitte C. Madrian,Jung Sakong +5 more
TL;DR: The experiment shows that when the commitment account pays a higher interest rate than the liquid account, the positive empirical slope relating penalties and commitment deposits is flattened, suggesting that naïve present-biased agents or agents with standard exponential discounting are also in the sample.
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Fiscal Rules and Discretion in a World Economy
Marina Halac,Pierre Yared +1 more
TL;DR: The authors compare the performance of coordinated and uncoordinated fiscal rules and show that if governments' present bias is small, coordinated rules are tighter than un-coordinated rules: individual countries do not internalize the redistributive effect of interest rates.
Commitment versus Flexibility with Costly Verification
Marina Halac,Pierre Yared +1 more
TL;DR: In this article, a principal faces an agent who is better informed but biased toward higher actions, and she can verify the agent's information and specify his permissible actions and show that if the verification cost...
Fiscal Rules and Discretion under Limited Enforcement
Marina Halac,Pierre Yared +1 more
TL;DR: In this paper, the authors consider a similar setting where the government has full policy discretion and can only be incentivized to comply with a rule via the use of penalties which are joint and bounded.
27
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Commitment Vs. Flexibility
TL;DR: In this article, the authors study the optimal tradeoff between commitment and flexibility in a consumption-savings model and find that imposing a minimum level of savings is always a feature of the solution.
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