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No-Betting Pareto Dominance

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  • Gilboa, Itzhak
  • Samuelson, Larry
  • Schmeidler, David
Abstract
We argue that, in the presence of uncertainty, the notion of Pareto dominance is not as compelling as under certainty. In particular, voluntary trade that is based on differences in tastes is commonly accepted as favorable, because no agent involved in it can be wrong about her tastes. By contrast, voluntary trade that is based on incompatible beliefs may indicate that at least one agent is wrong about her beliefs. We propose 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.

Suggested Citation

  • Gilboa, Itzhak & Samuelson, Larry & Schmeidler, David, 2012. "No-Betting Pareto Dominance," Foerder Institute for Economic Research Working Papers 275781, Tel-Aviv University > Foerder Institute for Economic Research.
    • Handle: RePEc:ags:isfiwp:275781
    DOI: 10.22004/ag.econ.275781
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    References listed on IDEAS

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    1. I. Gilboa & W. A. Postlewaite & D. Schmeidler, 2009. "Probability and Uncertainty in Economic Modeling," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 10.
    2. Alp Simsek, 2012. "Speculation and Risk Sharing with New Financial Assets," 2012 Meeting Papers 71, Society for Economic Dynamics.
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    5. Stiglitz, J.E., 1989. "Using Tax Policy To Curb Speculative Short-Term Trading," Papers t2, Columbia - Center for Futures Markets.
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    7. Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2007. "Probabilities in Economic Modeling," Levine's Bibliography 843644000000000357, UCLA Department of Economics.
    8. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63(4), pages 309-309.
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