We present a simple yet fully rational general equilibrium model that highlights the fact that relative wealth concerns can play a role in explaining the presence and dynamics of financial quot;bubbles.quot; Because our model has a finite horizon, our explanation for the existence of bubbles is...

We present a simple yet fully rational general equilibrium model that highlights the fact that relative wealth concerns can play a role in explaining the presence and dynamics of financial quot;bubblesquot;. Because our model has a finite horizon, our explanation for the existence of bubbles is...

We develop a stylized general equilibrium model in which technology quot;bubblesquot; occur. In our model, agents are able to invest both in a riskless technology and in a risky one. A high risk/reward technology supports over-investment and risk-taking behavior at a rate which is increasing in...

In this paper, we propose an explanation for biases in portfolio choice. We show that if individuals compete for local resources within their community, their utility depends on their own wealth as well as aggregate community wealth. This leads to an externality in portfolio choice. If investors...

Within a rational general equilibrium model in which agents care only about personal consumption, we consider a setting in which, due to borrowing constraints, individuals endowed with local resources underparticipate in financial markets. As a result, investors compete for local resources...