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.:
- Emmanuel Farhi & Iván Werning, 2010. "Progressive Estate Taxation," The Quarterly Journal of Economics, Oxford University Press, vol. 125(2), pages 635-673.
- Daron Acemoglu & Michael Golosov & Aleh Tsyvinski, 2006.
"Markets Versus Governments: Political Economy of Mechanisms,"
321307000000000032, UCLA Department of Economics.
- 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 & Oleg Tsyvinski, 2006. "Markets Versus Governments: Political Economy of Mechanisms," 2006 Meeting Papers 348, Society for Economic Dynamics.
- 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.
- 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.
- Adriano Rampini & Alberto Bisin, 2005. "Markets as Beneficial Constraints on the Government," 2005 Meeting Papers 325, Society for Economic Dynamics.
- 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, April.
- Marcus Berliant & John Ledyard, 2004. "Optimal Dynamic Nonlinear Income Taxes with No Commitment," Public Economics 0403004, EconWPA, revised 13 Aug 2005.
- Berliant, Marcus & Ledyard, John, 2011. "Optimal Dynamic Nonlinear Income Taxes with No Commitment," MPRA Paper 31749, University Library of Munich, Germany.
- 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.
- Andrew Atkeson & Robert E Lucas, 2010. "On Efficient Distribution with Private Information," Levine's Working Paper Archive 2179, David K. Levine.
- Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 327-360, December.
- 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.
- Joseph Farrell and Eric Maskin., 1987. "Renegotiation in Repeated Games," Economics Working Papers 8759, University of California at Berkeley.
- Christopher Phelan, 2005. "Opportunity and social mobility," Staff Report 323, Federal Reserve Bank of Minneapolis.
- Chari, V V & Kehoe, Patrick J, 1990. "Sustainable Plans," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 783-802, August.
- 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.
- Kevin Roberts, 1984. "The Theoretical Limits to Redistribution," Review of Economic Studies, Oxford University Press, vol. 51(2), pages 177-195.
- Phelan, Christopher, 1998. "On the Long Run Implications of Repeated Moral Hazard," Journal of Economic Theory, Elsevier, vol. 79(2), pages 174-191, April. Full references (including those not matched with items on IDEAS)