Credibility and endogenous societal discounting
We consider a dynamic moral hazard economy inhabited by a planner and a population of privately informed agents. We assume that the planner and the agents share the same discount factor, but that the planner cannot commit. We show that optimal allocations in such settings solve the problems of committed planners who discount the future less heavily than agents. Thus, we provide micro-foundations for dynamic moral hazard models that assume a societal discount factor in excess of the private one. We extend the analysis to allocations that are reconsideration-proof in the sense of Kocherlakota (1996). We show that these allocations solve the choice problem of a committed planner with a unit discount factor. (Copyright: Elsevier)
Volume (Year): 9 (2006)
Issue (Month): 3 (July)
|Contact details of provider:|| Postal: Marina Azzimonti, Department of Economics, Stonybrook University, 10 Nicolls Road, Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/red/
More information through EDIRC
|Order Information:|| Web: https://www.economicdynamics.org/subscription-information/ Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daron Acemoglu & Michael Golosov & Aleh Tsyvinski, 2006.
"Markets Versus Governments: Political Economy of Mechanisms,"
NBER Working Papers
12224, National Bureau of Economic Research, Inc.
- Daron Acemoglu & Michael Golosov & Aleh Tsyvinski, 2006. "Markets Versus Governments: Political Economy of Mechanisms," Levine's Bibliography 321307000000000032, UCLA Department of Economics.
- Daron Acemoglu & Michael Golosov & Oleg Tsyvinski, 2006. "Markets Versus Governments: Political Economy of Mechanisms," 2006 Meeting Papers 348, Society for Economic Dynamics.
- Marcus Berliant & John Ledyard, 2004.
"Optimal Dynamic Nonlinear Income Taxes with No Commitment,"
0403004, EconWPA, revised 21 Jun 2005.
- Marcus Berliant & John O. Ledyard, 2014. "Optimal Dynamic Nonlinear Income Taxes with No Commitment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(2), pages 196-221, 04.
- Berliant, Marcus & Ledyard, John, 2011. "Optimal Dynamic Nonlinear Income Taxes with No Commitment," MPRA Paper 31749, University Library of Munich, Germany.
- Kevin Roberts, 1984. "The Theoretical Limits to Redistribution," Review of Economic Studies, Oxford University Press, vol. 51(2), pages 177-195.
- V. V. Chari & Patrick J. Kehoe, 1989.
122, Federal Reserve Bank of Minneapolis.
- Phelan, Christopher, 1998. "On the Long Run Implications of Repeated Moral Hazard," Journal of Economic Theory, Elsevier, vol. 79(2), pages 174-191, April.
- Judd, Kenneth L., 1985. "The law of large numbers with a continuum of IID random variables," Journal of Economic Theory, Elsevier, vol. 35(1), pages 19-25, February.
- Emmanuel Farhi & Iván Werning, 2010.
"Progressive Estate Taxation,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 125(2), pages 635-673.
- Andrew Atkeson & Robert E Lucas, 2010.
"On Efficient Distribution with Private Information,"
Levine's Working Paper Archive
2179, David K. Levine.
- Andrew Atkeson & Robert E. Lucas, 1992. "On Efficient Distribution With Private Information," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 427-453.
- Farrell, Joseph & Maskin, Eric, 1989.
"Renegotiation in repeated games,"
Games and Economic Behavior,
Elsevier, vol. 1(4), pages 327-360, December.
- Joseph Farrell and Eric Maskin., 1987. "Renegotiation in Repeated Games," Economics Working Papers 8759, University of California at Berkeley.
- Farrell, Joseph & Maskin, Eric, 1987. "Renegotiation in Repeated Games," Department of Economics, Working Paper Series qt9wv3h5jb, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Christopher Phelan, 2005. "Opportunity and social mobility," Staff Report 323, Federal Reserve Bank of Minneapolis.
- Kocherlakota, Narayana R., 1996. "Reconsideration-Proofness: A Refinement for Infinite Horizon Time Inconsistency," Games and Economic Behavior, Elsevier, vol. 15(1), pages 33-54, July.
- Adriano Rampini & Alberto Bisin, 2005.
"Markets as Beneficial Constraints on the Government,"
2005 Meeting Papers
325, Society for Economic Dynamics.
- Bisin, Alberto & Rampini, Adriano A., 2006. "Markets as beneficial constraints on the government," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 601-629, May.
When requesting a correction, please mention this item's handle: RePEc:red:issued:05-139. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.