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Bubbles

  • Li Way Lee
Chapter

Abstract

In this chapter I suggest that markets in which firms are complex and yet similar are prone to bubbles. Facing similarity and complexity, we tend to make decision by the herding heuristic. Managers are aware of our tendency to herd, and they frame their products and services accordingly. That is to say, managers try to make bubbles. I illustrate this argument. I also draw parallels between a bubble and a Ponzi scheme. They are pretty striking. Before closing I wonder if bubbles have any redeeming virtue when firms are too big, too complex, too fragile, and too similar. I manage to discover some.

Keywords

Bubbles Herding Ponzi schemes 

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Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Li Way Lee
    • 1
  1. 1.Department of EconomicsWayne State UniversityDetroitUSA

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