Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper proposes a new solution to the problem of time inconsistency that arises in dynamic policy games played between the government and the public. In a Stackelberg game, a subgame-perfect equilibria is found in which members of the public employ trigger strategies in response to a sequence of policies chosen by the government. The government's precommitment to a particular policy is determined endogenously as part of its optimal strategy. In a simple political model of fiscal policy, the proposed equilibrium is used to show why a government will tolerate a rise in debt well above its targeted level. Copyright 1990 by Royal Economic Society.