BUBBLES AND CHARGES

The definitions of "fundamental value" and "speculative bubbles" that are standard in macroeconomics and finance are given formal representations as the countably additive part and the purely finitely additive part (a measure and a pure charge, respectively) of the supporting price system, when the commodity space is L(infinity). Examples illustrate that rational bubbles can occur in standard general equilibrium models with complete markets and a finite number of agents, even in the absence of uncertainty.