Martins-da-Rocha, V.F. and Vailakis, Y. (2012) Harsh default penalties lead to Ponzi schemes: a counterexample. Games and Economic Behavior, 75(1), pp. 277-282. (doi: 10.1016/j.geb.2011.10.004)
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Abstract
Páscoa and Seghir (2009) presented two examples to show that in the presence of utility penalties for default, collateral requirements do not always eliminate the occurrence of Ponzi schemes and equilibria may fail to exist. This paper aims at providing a counterexample to their claim. We show that in the examples they consider, a competitive equilibrium with no trade can be supported due to unduly pessimistic expectations on asset deliveries.
Item Type: | Articles |
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Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | Vailakis, Professor Yiannis |
Authors: | Martins-da-Rocha, V.F., and Vailakis, Y. |
College/School: | College of Social Sciences > Adam Smith Business School > Economics |
Journal Name: | Games and Economic Behavior |
ISSN: | 0899-8256 |
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