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A No-Trade Theorem under Knightian Uncertainty with General Preferences

  • Chenghu Ma
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    This paper derives a no-trade theorem under Knightian uncertainty, which generalizes the theorem of Milgrom and Stokey (1982, Journal of Economic Theory 26, 17) by allowing general preference relations. It is shown that the no-trade theorem holds true as long as agents' preferences are dynamically consistent in the sense of Machina and Schmeidler (1991, Econometrica 60, 745), and satisfies the so-called piece-wise monotonicity axiom. A preference satisfying the piece-wise monotonicity axiom does not necessarily imply the additive utility representation, nor is necessarily based on beliefs. Copyright Kluwer Academic Publishers 2001

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    File URL: http://hdl.handle.net/10.1023/A:1015550925961
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    Article provided by Springer in its journal Theory and Decision.

    Volume (Year): 51 (2001)
    Issue (Month): 2 (December)
    Pages: 173-181

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    Handle: RePEc:kap:theord:v:51:y:2001:i:2:p:173-181
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    1. Mark J. Machina & David Schmeidler, 1990. "A More Robust Definition of Subjective Probability," Discussion Paper Serie A 306, University of Bonn, Germany.
    2. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November.
    3. Robert J Aumann, 1999. "Agreeing to Disagree," Levine's Working Paper Archive 512, David K. Levine.
    4. Rubinstein, Ariel & Wolinsky, Asher, 1990. "On the logic of "agreeing to disagree" type results," Journal of Economic Theory, Elsevier, vol. 51(1), pages 184-193, June.
    5. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May.
    6. Geanakoplos, John, 1994. "Common knowledge," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 40, pages 1437-1496 Elsevier.
    7. Epstein Larry G. & Le Breton Michel, 1993. "Dynamically Consistent Beliefs Must Be Bayesian," Journal of Economic Theory, Elsevier, vol. 61(1), pages 1-22, October.
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