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A complementary note on the issue of time inconsistency revisited as an extended game

Abstract : Cellini and Lambertini endogenize through a timing game the moves of the central bank and the private sector in a model of monetary policy la Barro and Gordon. They find a multiplicity of equilibria, as the two Stackelberg outcomes emerge as the solutions of the timing game, with different inflation levels. By using the risk-dominance criterion to select the equilibrium we prove that there is a discontinuity in the inflation bias, depending on the inflation aversion of the private sector.
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https://halshs.archives-ouvertes.fr/halshs-00715222
Contributor : Cerdi Etudes & Documents - Publications <>
Submitted on : Friday, July 6, 2012 - 3:04:42 PM
Last modification on : Tuesday, April 20, 2021 - 10:48:06 AM

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Grégoire Rota-Graziosi, Hubert Kempf. A complementary note on the issue of time inconsistency revisited as an extended game. International Game Theory Review, World Scientific Publishing, 2011, 13 (4), pp.475-480. ⟨10.1142/S0219198911003106⟩. ⟨halshs-00715222⟩

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