2003, English, Article, Working paper edition: Commitment vs. flexibility Manuel Amador, Ivan Werning [and] George Marios Angeletos [electronic resource] Manuel Amador

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Bookmark: http://trove.nla.gov.au/version/116811752
Physical Description
  • 42 p. ;
Published
  • Cambridge, MA Massachusetts Institute of Technology, Dept. of Economics 2003
Language
  • English

Edition details

Title
  • Commitment vs. flexibility Manuel Amador, Ivan Werning [and] George Marios Angeletos
Also Titled
  • Commitment versus flexibility
Author
  • Manuel Amador
Other Authors
  • Werning, Iv?
  • Angeletos, Marios
  • Massachusetts Institute of Technology. Dept. of Economics
Published
  • Cambridge, MA Massachusetts Institute of Technology, Dept. of Economics 2003
Medium
  • [electronic resource]
Physical Description
  • 42 p. ;
Series
Summary
  • This paper studies the optimal trade-off between commitment and flexibility in an intertemporal consumption/​savings choice model. Individuals expect to receive relevant information regarding their own situation and tastes - generating a value for flexibility - but also expect to suffer from temptations - generating a value for commitment. The model combines the representations of preferences for flexibility introduced by Kreps (1979) with its recent antithesis for commitment proposed by Gul and Pesendorfer (2002), which nests the hyperbolic discounting model. We set up and solve a mechanism design problem that optimizes over the set of consumption/​saving options available to the individual each period. We characterize the conditions under which the solution takes a simple threshold form where minimum savings policies are optimal. Our analysis is also relevant for other issues such as situations with externalities or the problem faced by a paternalistic planner, which may be important for thinking about some regulations such as forced minimum schooling laws. Keywords: Banking and credit, English Industrial Revolution, interest rate determination, credit rationing, technological change and learning. JEL Classifications: D82, E21, E61, D91, H55.
Notes
  • "November 15, 2003." Includes bibliographical references (p. 40-42). Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.
Language
  • English
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