Mutual Illusions and Financing New Technologies: Two-Sided Informational Cascades

A 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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Year of publication:	2002
Authors:	Sanditov, Bulat ; Cowan, Robin ; Kool, Clemens
Institutions:	Maastricht : MERIT, Maastricht Economic Research Institute on Innovation and Technology
Subject:	economics of technology

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Extent:	application/pdf
Series:	Research Memoranda.
Type of publication:	Book / Working Paper
Language:	English
Notes:	The text is part of a series Research Memoranda Number 007
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005304527