Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jul, 2014, Volume 82, Issue 4

No‐Betting‐Pareto Dominance

https://doi.org/10.3982/ECTA11281
p. 1405-1442

Itzhak Gilboa, Larry Samuelson, David Schmeidler

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, , 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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