Tulip Mania was a speculative bubble that occurred during the period of the Dutch Golden Age. Suddenly contract prices for bulbs of some recently introduced tulips reached extraordinarily high levels. But what made this kind of tulip so special? It was a very special kind of quality that made people offer exceptionally high prices for the product. For example, the Viceroy was a tulip which was sold for 3000 to 4200 guilders at a time when a skilled craftsman only earned 300 guilders a year! The quick fall in prices, however, created essential problems among investors. Many such investors were ruined by the fall in prices, and Dutch commerce suffered a severe shock.
Tulip Mania is generally considered the first recorded speculative bubble. Since then the term “tulip mania” has often been used metaphorically to refer to any large economic bubble when asset prices deviate from intrinsic values, intrinsic values that are generally determined by the quality of the products.
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