Trade with Heterogeneous Multiple Priors

Atsushi Kajii and Takashi Ui

No 582, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This paper presents a general framework to understand the possibility of a purely speculative trade under asymmetric information, where the decision making rule of each trader conforms to the multiple priors model (Gibloa and Schmeidler, 1989): the agents are interested in the minimum of the conditional expected value of trade where the minimum is taken over the set of posteriors. In this framework, we derive a necessary and sufficient condition on the sets of posteriors, thus implicitly on the updating rules adopted by the agents, for non-existence of trade such that it is always common knowledge that every agent expects a positive gain.

Keywords: no trade; dynamic consistency; interim efficiency; rectangularity (search for similar items in EconPapers)
JEL-codes: C70 D81 D82 D84 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2004-02
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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