In this paper, the problem of inconsistent dynamic choice is discussed, as considered in the literature, both under certainty in the context of changing preferences, and under risk and uncertainty in the case of preference orderings which violate expected utility theory. The problem of...

We document a robust dynamic inconsistency in risky choice. Using a unique brokerage dataset and a series of experiments, we compare people's initial risk-taking plans to their subsequent decisions. Across settings, people accept risk as part of a “loss-exit” strategy—planning to continue...

One of the main reasons to dollarize an emerging market economy is to eliminate high, persistent, and volatile inflation. To be effective, dollarization must generate sufficient credibility, which in turn depends critically on whether its expected probability of reversal is low. Argentina once...

The paper studies bargaining games involving players with present-biased preferences. The paper shows that the relative timing of bargaining rewards and bargaining costs will determine whether the players' present-bias will affect bargaining outcomes. In cases where players agree to a bargain in...

Intertemporal choice refers to the decision-making process involving trade-offs between rewards available at different points in time (smaller sooner versus larger later rewards). In this process, empirical evidence often deviates from the exponential preferences predicted by the normative...

This paper studies the implications of central bank credibility for long-run inflation and inflation dynamics. We introduce central bank lack of commitment into a standard non-linear New Keynesian economy with sticky-price monopolistically competitive firms. Inflation is driven by the...