Existence of speculative bubbles when time-horizons are finite

Shaheen Seedat () and Alexander Zimper
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Shaheen Seedat: Said Business School, University of Oxford

Economics Bulletin, 2012, vol. 32, issue 1, 251-259

Abstract: This note extends the existing literature on speculative bubbles by allowing for arbitrary trading sequences. As our main result we prove that bubbles may exist in a myopic rational expectations equilibrium (Radner 1979) if and only if every agent expects infinitely many trading opportunities to exist. For finite horizons our finding implies the possible existence of bubbles under the plausible bounded rationality condition that every agent believes he will not end-up with holding the asset when the bubble bursts.

Keywords: Speculative behavior; bounded rationality; Lebesgue integral (search for similar items in EconPapers)
JEL-codes: D8 G1 (search for similar items in EconPapers)
Date: 2012-01-20
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