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Working Paper

Commitment As Irreversible Investment

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Considering time inconsistency as a problem of irreversible investment brings some neglected points to the fore. Making a policy choice in real time and under current conditions emphasizes the importance of the timing of commitment, the regret over past decisions, and the option value of not committing. This paper applies these concepts to monetary policy, banking regulation, and capital taxation.
12.01.1992WP 92-17DOI 10.26509/frbc-wp-199217
Suggested Citation

Haubrich, Joseph G., and Joseph Ritter. 1992. “Commitment As Irreversible Investment.” Federal Reserve Bank of Cleveland, Working Paper No. 92-17. https://doi.org/10.26509/frbc-wp-199217