Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315950 
Year of Publication: 
2025
Series/Report no.: 
Working Paper No. WP 2025-05
Publisher: 
Federal Reserve Bank of Chicago, Chicago, IL
Abstract: 
We develop a model of Ponzi schemes with asymmetric information to study Ponzi frauds. A long-lived agent offers to save on behalf of short-lived agents at a higher rate than they can earn themselves. The long-lived agent may genuinely have a superior savings technology, but may be an imposter trying to steal from short-lived agents. The model identifies when a Ponzi fraud can occur and what interventions can prevent it. A key feature of Ponzi frauds is that the long-lived agent builds trust over time and improves their reputation by keeping the scheme going.
Subjects: 
Ponzi scheme
asymmetric information
reputation
fraud
JEL: 
C73
D82
G51
K42
L14
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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