Forteza, Alvaro; Noboa, Cecilia - Departamento de Economía, Facultad de Ciencias Sociales - 2014
We present a simple model of a benevolent government that provides insurance to risk averse individuals. As in macroeconomics, commitment to fully contingent rules is better than discretion, but when the government can only commit to simple rules, discretion may be the best available option. The...