An asymmetric information model of a finite horizon "nth order" rational asset price bubble is presented, where (all agents know that)-super-n the asset is worthless. Also, the model has only two agents, so the first order version of the bubble is simpler than other first order bubbles in the literature. Copyright The Econometric Society 2004.

Most studies of the demand for private education have treated “white flight” as a response to the proportion of the population that is black in a particular area. The present article, by contrast, considers the possibility that this flight may be from poverty rather than race. The article develops an aggregate demand function for private education from which individual behavior may be inferred, and then applies the model to data from Mississippi. The results suggest that prejudice is directed against poor blacks rather than against nonpoor blacks or poor whites.

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Policy towards speculative bubbles is examined in a model of a Þnite horizon "greater fool" bubble, with rational agents, asymmetric information and short-sales constraints. This model permits the use of standard tools of comparative dynamics and welfare economics to analyze bubble policies.Government policy is modeled as deßating overpriced assets by revealing information about this overpricing. We assume in this paper that the central bank only deßates assets if they are, in fact, overpriced. However, the central bank is never the only one to know that assets are overpriced.In this environment, a policy rule of deßating overpriced assets also inßuences expectations in states of the world where the central bank does nothing. That is, if the central bank is following a bubble-bursting rule, then the market interprets inaction as an implicit endorsement of asset prices, which raises these prices. This can reduce the lemons problem caused by asymmetric information, if prices rise because the policy protects uninformed buyers from "bad sellers" who know assets are overpriced. However, if the central bank only deßates "strong bubbles," where all investors already know the asset is overpriced, then inaction raises prices because bad sellers become more conÞdent, and this tends to make the lemons problem worse. * The paper beneÞtted greatly from discussions with

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