Our notion of what triggers a boom-bust cycle is very stylized: the signal occurs on a particular date and people learn that it is exactly false on another particular date. In more realistic scenarios, people form expectations based on an accumulation of various signals. If people’s expectations are in fact overoptimistic, they come to this realization only slowly and over time. Although the trigger of the boom-bust cycle in our analysis is in some ways simplistic, it has the advantage of allowing us to highlight a result that we think is likely to survive in more realistic settings
