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Belief-consistent Pareto dominance

Xiangyu Qu

Economic Theory Bulletin, 2020, vol. 8, issue 2, No 4, 219-229

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: D80 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s40505-019-00178-0

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