Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Sep, 2013, Volume 81, Issue 5

Comment on “Commitment vs. Flexibility”

https://doi.org/10.3982/ECTA10739
p. 2113-2124

Attila Ambrus, Georgy Egorov

This comment corrects two results in the 2006 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.


Log In To View Full Content

Supplemental Material

Supplement to "A Comment on Commitment vs. Flexibility"

This appendix contains proofs omitted from the text.