We develop a simple, tractable and sound stochastic framework for the joint treatment of risk and time preferences, in order to facilitate the estimation of risk and time attitudes. In so doing we: (i) study deterministic ...

Most central banks perceive a trade-off between stabilizing inflation and stabilizing the gap between output and desired output. However, the standard new Keynesian framework implies no such trade-off. In that framework, ...

Recent experiments suggest that level-k behavior is often driven by subjects' beliefs, rather than their binding cognitive bounds. But the extent to which this is true in general is not completely understood, mainly because ...

Major bubble episodes are rare events. In this paper, we examine what factors might cause some asset price bubbles to become very large. We recreate, in a laboratory setting, some of the specific institutional features ...

We obtain a recursive formulation for a general class of contracting problems involving incentive constraints. Under these constraints, the corresponding maximization (sup) problems fails to have a recursive solution. Our ...