Mutual Illusions and Financing New Technologies: Two-Sided Informational Cascades
AbstractA model in which agents on both sides of the market are subject to informational cascades isexamined. In an uncertain environment with asymmetric information agents tend to beoveroptimistic about the state of the world, a result that fits with empirical evidence on financingnew technologies. This overoptimism based on mutual illusions makes the system vulnerable totwo-sided bubbles, and may be one of the reasons behind “dot com” crash.
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Bibliographic InfoPaper provided by Maastricht : MERIT, Maastricht Economic Research Institute on Innovation and Technology in its series Research Memoranda with number 007.
Date of creation: 2002
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economics of technology ;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-02-24 (All new papers)
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