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Two notes about Ponzi schemes

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  • Patrick Honohan

Abstract

A Ponzi scheme is an arrangement whereby a promoter offers an investment opportunity with attractive dividends, but where the only basis for the dividends is the future receipts from new investors. The first of these two notes explores some of the analytical properties of a Ponzi scheme, addressing in particular the question whether it is possible for a Ponzi scheme to exist if all the participants are rational. The second note briefly examines the collapse of the PMPA insurance company whose accounts document the evolution of an unsound financial operation displaying many of the characteristics of the Ponzi scheme.

Suggested Citation

  • Patrick Honohan, 1987. "Two notes about Ponzi schemes," Working Papers 198753, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:198753
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    File URL: http://hdl.handle.net/10197/1440
    File Function: First version, 1987
    Download Restriction: no
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    Keywords

    Ponzi schemes;

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