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Belief-consistent Pareto dominance

  • Xiangyu QuEmail author
Research Article
  • 8 Downloads

Abstract

The classic Pareto criterion claims that all voluntary trades, even on the grounds of heterogeneous beliefs, should be encouraged. I argue that a trade without hope for Pareto improvement remains controversial. I introduce and characterize a notion of belief-consistent Pareto dominance to formalize this argument, which, in addition to unanimity of preferences, requires all rankings in a trade to be supported by some common beliefs that must coincide with the agents’ beliefs about the events on which all agents agree.

Keywords

Heterogeneous beliefs Belief consistent Pareto condition Speculation 

JEL Classification

D80 

Notes

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Copyright information

© Society for the Advancement of Economic Theory 2019

Authors and Affiliations

  1. 1.CNRSCentre d’Economie de la SorbonneParisFrance
  2. 2.School of ManagementWuhan University of TechnologyWuhanChina

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