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We develop a parsimonious model of bubbles based on the assumption of imprecisely known market depth. In a speculative bubble, traders drive the price above its fundamental value in a dynamic way, driven by rational expectations about future price developments. At a previously unknown date, the bubble will endogenously burst. We provide a general condition for the possibility of bubbles depending on the risk-free rate, uncertainty about market depth, and traders’ degree of leverage. This allows us to discuss several policy measures. Bubbles always reduce aggregate welfare. Among others, certain monetary policy rules, minimum leverage ratios, and a correctly implemented Tobin tax can prevent their occurrence. Implemented incorrectly, however, some of these measures backfire and facilitate bubbles.

A new employee may work hard to build his reputation. However, the longer he is employed in his job, the more the firm will have learned about his ability. When there are career concerns, the incentives for an employee to influence the firm's perceptions of his ability decrease over time. Rotating the employee to a different job results in information loss regarding ability, thereby adding fresh impetus for effort. However, job rotation also reduces the time horizon, thus reducing future rents from effort. We show that a simple rule of thumb for an optimal assignment duration is 4 periods multiplied by the ratio of output uncertainty to prior type uncertainty. Then, we study several extensions: different bargaining positions, partial information loss, as well as learning by doing effects.

Summary: The privatization of the Italian savings banks is often described as a success story. Proponents of privatization argue that a similar reform could cure the current problems in the German banking sector. In this paper, we ask whether the Italian experience can really serve as a role model for Germany. Our analysis confirms that the Italian reforms of the 1990s were a success. Banks’ profitability increased, without impairing competition or the availability of banking services and loans. However, this success has to be attributed to a broad set of reforms, which went far beyond the privatization of savings banks. Moreover, Italy had a different starting point before the reforms, and the structure of the public banking sector differed markedly from Germany’s. Therefore, one may question the transferability of the Italian experience to Germany. The costs and benefits of privatization should be weighed carefully against each other before abandoning the three-pillar system. Zusammenfassung: Die Privatisierung italienischer Sparkassen wird haufig als Erfolgsgeschichte bezeichnet. Befurworter einer Privatisierung argumentieren, dass die gegenwartigen Probleme im deutschen Bankensystem auf ahnlichem Wege behoben werden konnten. In diesem Aufsatz stellen wir die Frage, ob das italienische Beispiel wirklich als Vorbild fur Deutschland dienen kann. Unsere Analyse bestatigt, dass die italienischen Reformen der 90er Jahre ein Erfolg waren. Die Banken wurden profitabler, ohne dass der Wettbewerb oder die Verfugbarkeit von Bankleistungen oder Krediten eingeschrankt wurden. Dieser Erfolg ist jedoch das Ergebnis eines breiten Reformprozesses, der weit uber die Privatisierung der Sparkassen hinausging. Auserdem war der Ausgangspunkt vor den Reformen ein anderer als in Deutschland, und der offentliche Bankensektor wies andere Strukturen auf. Daher kann man die Ubertragbarkeit der italienischen Erfahrung auf Deutschland in Frage stellen. Kosten und Nutzen einer Privatisierung sollten sorgfaltig gegeneinander abgewogen werden, bevor man das „Drei-Saulen-System“ aufgibt.