We develop a model of rational bubbles based on leverage and the assumption of an imprecisely known maximum market size … lend to traders with limited liability in a bubble is endogenous. Bubbles reduce welfare of future investors. We provide … general conditions for the possibility of bubbles depending on uncertainty about market size, traders' degree of leverage and …

We develop a parsimonious model of bubbles based on the assumption of imprecisely known market depth. In a speculative … possibility of bubbles depending on the risk-free rate, uncertainty about market depth, and traders’ degree of leverage. This … allows us to discuss several policy measures. Bubbles always reduce aggregate welfare. Among others, certain monetary policy …

We develop a model of rational bubbles based on leverage and the assumption of an imprecisely known maximum market size … decide whether to lend to traders with limited liability. Bubbles increase welfare of the initial asset holders, but reduce … welfare of future households. We provide general conditions for the possibility of bubbles depending on uncertainty about …