Bailouts, Time Inconsistency, and Optimal Regulation
نویسندگان
چکیده
منابع مشابه
Bailouts, Time Inconsistency, and Optimal Regulation
We make three points. First, ex ante e¢ cient contracts often require ex post ine¢ ciency. Second, the time inconsistency problem for the government is more severe than for private agents because re sale e¤ects give governments stronger incentives to renegotiate contracts than private agents. Third, given that the government cannot commit itself to not bailing out rms ex post, ex ante regulat...
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This paper develops a theory of optimal provision of commitment devices to people who value both commitment and exibility, and whose preferences di¤er in the degree of time inconsistency. If time inconsistency is observable, then both a planner and a monopolist provide devices that help each person commit to the e¢ cient level of exibility. But the combination of unobservable time inconsisten...
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We consider a moral hazard economy with the potential for collusion between bankers and borrowers to study how incentives for risk taking are affected by the quality of supervision. We show that a low cost of capital or low return on investment may generate excessive risk taking. Because of a pecuniary externality, the market equilibrium is ineffi cient, therefore bank capital ratio should be r...
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I study the optimal supply of exible commitment devices to people who value both commitment and exibility, and whose preferences exhibit varying degrees of time inconsistency. I nd that, if time inconsistency is observable, then both a monopolist and a planner supply devices that enable each person to commit to the e¢ cient level of exibility. If instead time inconsistency is unobservable, ...
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We analyze incentive-efficient government bailouts within a canonical model of intra-firm moral hazard. Bailouts exacerbate the moral hazard of firms and managers in two ways. First, they make them less averse to failing. Second, the taxes to fund bailouts dampen their incentives. Nevertheless, if third-party externalities from keeping the firm alive are strong, bailouts can improve welfare. Ou...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2013
ISSN: 1556-5068
DOI: 10.2139/ssrn.3555573