We consider the problem of stopping a diffusion process with a payoff functional involving probability distortion. The problem is inherently time-inconsistent as the level of distortion of a same event changes over time. We study stopping decisions of naive agents who reoptimize continuously in...

The paper presents a dynamic theory for time-inconsistent problems of optimal stopping. The theory is developed under the paradigm of expected discounted payoff, where the process to stop is continuous and Markovian. We introduce equilibrium stopping policies, which are implementable stopping...

We estimate a model in which fiscal and monetary policy obey the targeting rules of distinct policy authorities, with potentially different objective functions. We find: (1) Time-consistent policy fits U.S. time series at least as well as instrument-rules-based behavior; (2) American policies...

We develop a Fiscal Frontier which traces out the maximum government debt level that can be sustained at a given welfare cost. Through duality, the intertemporal policy mix underpinning the Frontier mirrors standard Ramsey policy and defines an upper limit on the welfare gains that can be...