Inês Xavier, from the Federal Reserve Board, will present 

A Model of Charles Ponzi

We develop an asymmetric information model of Ponzi schemes to study the possibility of 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 in our model is that the long-lived agent builds trust over time and improves their reputation by keeping the scheme going.