EconPapers    
Economics at your fingertips  
 

Inside information in Ponzi schemes

Klarita Sadiraj and Arthur Schram ()
Additional contact information
Klarita Sadiraj: The Netherlands Institute for Social Research (SCP)

Journal of the Economic Science Association, 2018, vol. 4, issue 1, 29-45

Abstract: Abstract Ponzi-like investment schemes were popular in many transition economies. Often, some government officials had inside information about the viability of such schemes and used this information to their own advantage. We introduce a novel experimental design that allows us to study the extent to which this kind of abuse of information is possible and what consequences it has for those without such information. In particular, we investigate how the proportion of informed versus uninformed investors and the promised dividends affect the way in which informed investors can exploit the investments of uninformed investors. Our results show that uninformed investors follow the observed choices of the informed even more than predicted by theory. This adds to the devastating effects that this kind of underground activity can have on the uninformed.

Keywords: Ponzi scheme; Informed investors; Laboratory experiment (search for similar items in EconPapers)
JEL-codes: C P (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s40881-018-0047-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:spr:jesaex:v:4:y:2018:i:1:d:10.1007_s40881-018-0047-4

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/40881

Access Statistics for this article

Journal of the Economic Science Association is currently edited by Nikos Nikiforakis and Robert Slonim

More articles in Journal of the Economic Science Association from Springer, Economic Science Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-05-21
Handle: RePEc:spr:jesaex:v:4:y:2018:i:1:d:10.1007_s40881-018-0047-4