Simple Finite Horizon Bubbles Robust to Higher Order Knowledge
Econometrica · 2004 · Volume 72 · Issue 3
DOI: 10.1111/j.1468-0262.2004.00516.x
Abstract
An asymmetric information model of a finite horizon “nth order” rational asset price bubble is presented, where (all agents know that)nthe asset is worthless. Also, the model has only two agents, so the first order version of the bubble is simpler than other first order bubbles in the literature.
Keywords
Bubbles, asymmetric information, higher order knowledge
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