https://macropaperwarehouse.com/authors/ngoc-sang-pham/Ngoc-Sang PhamHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/comment-on-asset-bubbles-and-overlapping-generations-by-jean-tirole/https://macropaperwarehouse.com/papers/comment-on-asset-bubbles-and-overlapping-generations-by-jean-tirole/<p>Tirole (1985) studied an overlapping generations model with capital accumulation and showed that the emergence of asset bubbles can resolve the capital over-accumulation problem when the economy is dynamically inefficient. His Proposition 1(c) claims that a bubble can emerge if and only if the dividend growth rate exceeds the bubbleless steady-state interest rate. This comment identifies an error in that proposition: the stated condition is necessary but not sufficient for bubble existence. The paper constructs an explicit counterexample in which the dividend growth rate exceeds the bubbleless interest rate but no bubble equilibrium exists, and separately constructs a case in which a bubble exists even when the condition in Proposition 1(c) fails. Corrected necessary and sufficient conditions for bubble existence are derived, and the implications of the correction for the welfare results and the relationship between dynamic inefficiency and bubbles are characterized.</p>