Greater fool theory

In and, the greater fool theory states that the  of an object is determined not by its , but rather by irrational beliefs and expectations of market participants. A price can be justified by a rational buyer under the belief that another party is willing to pay an even higher price. In other words, one may pay a price that seems "foolishly" high because one may rationally have the expectation that the item can be resold to a "greater fool" later.

Examples
In, the greater fool theory can drive investment through the expectation that prices always rise. A period of rising prices may cause lenders to underestimate the risk of default.

A is a form of investor fraud where earlier investors are paid from the money gained by more recent investors. Ponzi schemes rely on a continuous supply of greater fools who are willing to buy into the scheme in order to stay afloat. Although a share in such a scheme has no value whatsoever, so long as more greater fools buy into it, it can remain profitable for the investors involved.

In the, the greater fool theory applies when many investors make a questionable , with the assumption that they will be able to sell it later to "a greater fool". In other words, they buy something not because they believe that it is worth the price, but rather because they believe that they will be able to sell it to someone else at an even higher price. It is also called survivor investing. It is similar in concept to the principle of stock investing.

is another commodity in which speculation and privileged access drive prices, not intrinsic value. In November 2013, manager  of  was selling at auction artworks that he had only recently acquired through private transactions. Works included paintings by and  and a sculpture by. They were expected to sell for up to $80 million. In reporting the sale,  noted: "'Ever the trader, Mr. Cohen is also taking advantage of today’s active art market where new collectors will often pay far more for artworks than they are worth.'"