But when Thursday arrives and Arsenal takes on Eintracht Frankfurt, there is every reason for the father to cancel the test, since he has already made his son study. His optimal choices are time-inconsistent. And his son is not outsmarted so easily. He will call his father’s bluff, as he knows the Europa League schedule just as well as his father does.
Similarly, a one-off promise of “lower for longer” holds the allure of a monetary stimulus now, at the cost of higher inflation in the future. But when the time comes to make good on the promise, the benefits have already been reaped, and only the cost of higher inflation remains. At this point, policymakers have an incentive to renege on their promise as well.