Template-Type: ReDIF-Paper 1.0
Title: Asset Bubbles, Pay-As-You-Go Systems and Dynamic Efficiency
Author-Name: Günther Lang

Author-Postal: 
Author-Phone: 
Author-Homepage: 
Classification-JEL: D91, E13, G11, H55, H62, O12, O16, O41 
Keywords: Bubbles, Dynamic Effiency, Ponzi Games, Pay-As-You-Go Systems
Abstract: This paper deals with the role of bubbles, having the same meaning as 
 Ponzi games, for implementing efficient growth paths in a closed economy 
 overlapping generations model. It is shown that the well-known arbitrage 
 condition for bubbles, namely that they must yield the same return in 
 equilibrium as real assets, is generically neither necessary nor 
 sufficient for a Pareto-improvement compared to a perfect-foresight 
 equilibrium without bubbles. A consequence of this fact is that bubbles, or 
 Ponzi games, are not Pareto-improving generically, and therfore, it can be 
 irrational for agents to be on the demand side on the market for bubbles, 
 although a bubbly equilibrium could exist.
Series: Sonderforschungsbereich 303, University of Bonn, Germany

Length: 18 pages
Creation-Date: 1993-12
Revision-Date: 
Handle: RePEc:bon:bonsfa:425