Articles

No-Betting Pareto Dominance

I. GILBOA, L. SAMUELSON, D. SCHMEIDLER

Econometrica

juillet 2014, vol. 82, n°4, pp.1405-1442

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Pareto efficiency, Betting, Speculation, Pareto dominance, Beliefs


We argue that the notion of Pareto dominance is not as compelling in the presence of uncertainty as it is under certainty. In particular, voluntary trade based on differences in tastes is commonly accepted as desirable, because tastes cannot be wrong. By contrast, voluntary trade based on incompatible beliefs may indicate that at least one agent entertains mistaken beliefs. We propose and characterize a weaker, No-Betting, notion of Pareto domination which requires, on top of unanimity of preference, the existence of shared beliefs that can rationalize such preference for each agent


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