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We develop a model to study optimal decision making in the face of uncertainty about the timing and structure of a future event. The model is used to study optimal decision making and welfare when individuals face uncertainty about when and how Social Security will be reformed. When individuals...
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risky projects and households buy bonds under rational expectations about default risk. Bailouts induce greater leverage but … failures. Bailouts are efficient but not Pareto optimal: bailouts increase social welfare by mitigating uninsurable risk, which …
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