Time Consistency in Dynamic Bargaining: The Role of Committees as Substitutes for Commitment

Alessandro Riboni

No 684, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: \QTR{it}{The standard framework to study time consistency assumes that economic decisions are made by one legislator. In this paper policies are negotiated in a committee by playing a dynamic voting game. The implications of this change are remarkable: the social optimum becomes time consistent. While concentration of powers in a single legislator creates credibility problems, we show that separation of powers yields commitment. The main focus of the paper is on the time consistency of monetary policy when decisions are made in a monetary committee, such as the F.O.M.C. or the European Central Bank. We prove that making decisions inside a committee works as a substitute for a commitment technology. Notice that this result may hold even when }$all$\QTR{it}{\ legislators in the committee have a one-shot incentive to deviate from the ex-ante optimal plan. Last, we provide normative prescriptions regarding the identity of the agenda setter and the location of the initial status quo necessary to implement the utilitarian optimum

Keywords: Time Consistency; Voting; Committees (search for similar items in EconPapers)
JEL-codes: D71 D72 E58 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-cdm and nep-mic
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://troi.cc.rochester.edu/~ribo/jmp.pdf main text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to troi.cc.rochester.edu:80 (Invalid argument)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed004:684

Access Statistics for this paper

More papers in 2004 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().