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Rational Frenzies and Crashes / Jeremy Bulow, Paul Klemperer.
- Format:
- Book
- Author/Creator:
- Bulow, Jeremy.
- Series:
- Technical Working Paper Series (National Bureau of Economic Research) no. t0112.
- NBER technical working paper series no. t0112
- Language:
- English
- Subjects (All):
- Efficient market theory.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1991.
- Cambridge, Mass. : National Bureau of Economic Research, 1991.
- Summary:
- Most markets clear through a sequence of sales rather than through a Walrasian auctioneer. Because buyers can decide between buying now or later, rather than only now or never, buyers' current 'willingness to pay' is much more sensitive to price than is the demand curve. A consequence is that markets will be extremely sensitive to new information, leading to both 'frenzies, " where demand feeds upon itself, and "crashes," where price drops discontinuously. Although no buyer's independent reservation value reveals much about overall demand, a small increase in one such value can cause a large increase or decrease in average price.
- Notes:
- Print version record
- September 1991.
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