A Model of Charles Ponzi

Gadi Barlevy and Inês Xavier
Additional contact information
Inês Xavier: https://www.federalreserve.gov/econres/ines-m-xavier.htm

No 2025-020, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We develop a model of Ponzi schemes with asymmetric information to study Ponzi frauds. A long-lived agent offers to save on behalf of short-lived agents at a higher rate than they can earn themselves. The long-lived agent may genuinely have a superior savings technology, but may be an imposter trying to steal from short-lived agents. The model identifies when a Ponzi fraud can occur and what interventions can prevent it. A key feature of Ponzi frauds is that the long-lived agent builds trust over time and improves their reputation by keeping the scheme going.

Keywords: Ponzi scheme; Asymmetric information; Reputation; Fraud (search for similar items in EconPapers)
JEL-codes: C73 D82 G51 K42 L14 (search for similar items in EconPapers)
Pages: 55 p.
Date: 2025-03-25
New Economics Papers: this item is included in nep-ind, nep-law and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.federalreserve.gov/econres/feds/files/2025020pap.pdf (application/pdf)

Related works:
Working Paper: A Model of Charles Ponzi (2025)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2025-20

DOI: 10.17016/FEDS.2025.020

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().