The Econometric SocietyEdited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262
August 15, 2022
Econometrica: Sep, 2013, Volume 81, Issue 5
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.
This appendix contains proofs omitted from the text.
