Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296393 
Year of Publication: 
2022
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 17 [Issue:] 4 [Year:] 2022 [Pages:] 1559-1587
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
This paper develops a model of rational bubbles where trade of an asset takes place through a chain of middlemen. We show that there exists a unique and robust equilibrium, and a bubble can occur due to information frictions in bilateral and decentralized markets. Under reasonable assumptions, the equilibrium price is increasing and accelerating during bubbles although the fundamental value is constant over time. Bubbles may be detrimental to the economy, but any announcement from the central bank has no effect on welfare with risk neutral agents. Middlemen are the source of financial fragility.
Subjects: 
asymmetric information
flippers
higher-order uncertainty
middlemen
Rational bubbles
JEL: 
D83
D84
G12
G14
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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