Munich Personal RePEc Archive

Expectations Over Durable Assets: How to Avoid the Formation of Value Bubbles.

Rosas-Martinez, Victor H. (2016): Expectations Over Durable Assets: How to Avoid the Formation of Value Bubbles.

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Abstract

There is a finite set of characteristics which can be present in a durable asset adding value to it, and that are not necessarily part of it in the moment of its adquisition. We represent formally how the expectations over the possible future characteristics of these goods influence its price, and get the conditions for the formation of bubbles, which allows us to propose mechanisms to avoid this kind of instinctive collective regimes. Posteriorly we extend our analysis to consider the case of monopoly and of an m-firms oligopoly producing these kinds of goods, finding that the cardinality of the firm(s)' possible plans of production to maximize benefits is the same. We show relation between the assets' prices and the cardinalities of the sets of suppliers, assets' varieties and entry consumers, with an indirect dependence on the rentlabor wages. We model boundedly an analysis of the effect of tendencies like corruption on newly informed and non-bayesian probabilities that constitute the prices. Finally, some extra provided mechanisms to avoid bubbles focus in reverting badly programed rule of thumbs, to get back to the rightgreat rules respect

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