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No‐Betting‐Pareto Dominance

Author

Listed:
  • Itzhak Gilboa
  • Larry Samuelson
  • David Schmeidler

Abstract

We argue that the notion of Pareto dominance is not as compelling in the presence of uncertainty as it is under certainty. In particular, voluntary trade based on differences in tastes is commonly accepted as desirable, because tastes cannot be wrong. By contrast, voluntary trade based on incompatible beliefs may indicate that at least one agent entertains mistaken beliefs. We propose and characterize a weaker, No‐Betting, notion of Pareto domination which requires, on top of unanimity of preference, the existence of shared beliefs that can rationalize such preference for each agent.

Suggested Citation

  • Itzhak Gilboa & Larry Samuelson & David Schmeidler, 2014. "No‐Betting‐Pareto Dominance," Econometrica, Econometric Society, vol. 82(4), pages 1405-1442, July.
    • Handle: RePEc:wly:emetrp:v:82:y:2014:i:4:p:1405-1442
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    File URL: http://hdl.handle.net/10.1111/ecta.2014.82.issue-4.x
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