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  3. An informational Ponzi-scheme


Documento de trabajo

An informational Ponzi-scheme

  • person

    Francisco Silva; 

  • class Documento de Trabajo IE-PUC, N° 539, 2020

Abstract: I show how “experts” who have no intrinsic ability or knowledge are able to sustain a permanent reputation that they do, even in a world where agents have rational expectations and access to an unlimited amount of data about the experts predicting ability. The claim of having such knowledge attracts clients to the expert, allowing the expert to have access to the inside information they provide. That information can then be used by the expert to back up that claim.

JEL classication: D82, C73
Keywords: imperfect monitoring, dynamic cheap talk, experts