Comment on "Commitment vs. Flexibility"

Journal Article (Journal Article)

This comment corrects two results in the 2006 Econometrica paper by Amador, Werning, and Angeletos (AWA), that features a model in which individuals face a trade-off between flexibility and commitment. First, in contrast to Proposition 1 in AWA, we show that money-burning can be part of the ex ante optimal contract when there are two states. Second, in contrast to Proposition 2 in AWA, we show that money-burning can be imposed at the top (in the highest liquidity shock state), even when there is a continuum of states. We provide corrected versions of the above results. © 2013 The Econometric Society.

Full Text

Duke Authors

Cited Authors

  • Ambrus, A; Egorov, G

Published Date

  • January 1, 2013

Published In

Volume / Issue

  • 81 / 5

Start / End Page

  • 2113 - 2124

Electronic International Standard Serial Number (EISSN)

  • 1468-0262

International Standard Serial Number (ISSN)

  • 0012-9682

Digital Object Identifier (DOI)

  • 10.3982/ECTA10739

Citation Source

  • Scopus