THE ISSUE OF TIME INCONSISTENCY REVISITED AS AN EXTENDED GAME

Roberto Cellini and Luca Lambertini ()

International Game Theory Review (IGTR), 2010, vol. 12, issue 02, 161-174

Abstract: We reformulate the monetary policy model of Barro and Gordon (1983a) by using an extended game with observable delay where the hierarchy of play between the central bank and the private sector is endogenous. This allows us to endogenise the institutional setup wherein the monetary policy game takes place. We show that positive inflation may be observed due to mixed strategies rather than time inconsistency.

Keywords: Monetary policy; time consistency; extended games; C73; E52; E61 (search for similar items in EconPapers)
JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2010
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Working Paper: The issue of time inconsistency revisited as an extended game (2003)
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DOI: 10.1142/S021919891000257X

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