Please use this identifier to cite or link to this item: https://hdl.handle.net/1783.1/69507
The optimal design of Ponzi schemes in finite economies
| Author |
Bhattacharya, Utpal
|
|---|---|
| Issue Date | 2003 |
| Source | Journal of Financial Intermediation, v. 12, (1), January 2003, p. 2-24 |
| Abstract | As no rational agent would be willing to take part in the last round in a finite economy, it is difficult to design Ponzi schemes that are certain to explode. This paper argues that if agents correctly believe in the possibility of a partial bailout when a gigantic Ponzi scheme collapses, and they recognize that a bailout is tantamount to a redistribution of wealth from non-participants to participants, it may be rational for agents to participate, even if they know that it is the last round. We model a political economy where an unscrupulous profit-maximizing promoter can design gigantic Ponzi schemes to cynically exploit this |
| Subject | |
| DOI | 10.1016/S1042-9573(02)00007-4 |
| ISSN | 1042-9573 |
| Language | English |
| Type | Article |
| Access |
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