Money Pumps in the Market

Ariel Rubinstein () and Ran Spiegler ()

Journal of the European Economic Association, 2008, vol. 6, issue 1, 237-253

Abstract: Agents who employ non-rational choice procedures are often vulnerable to exploitation, in the sense that a profit-seeking trader can offer them a harmful transaction which they will nevertheless accept. We examine the vulnerability of a procedure for deciding whether to buy a lottery: observe another agent who already bought it and buy the lottery if that agent's experience was positive. We show that the exploitation of such agents can be embedded in an inter-temporal market mechanism, in the form of speculative trade in an asset of no intrinsic value. (JEL: D84) (c) 2008 by the European Economic Association.

JEL-codes: D84 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (13)

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Working Paper: Money Pumps in the Market (2005)
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