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The No Trade Principle in General Environments

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  • Ngai-Ching Wong
  • Man-Chung Ng

Abstract

The no trade principle asserts that risk-neutral agents are not prepared to trade if and only if a common prior exists. The purpose of this article is to provide general versions of this principle. We first study the case when no topological assumption is made on the state space. Bets are uniform limits of bounded measurable functions. We then assume that the state space is completely regular Hausdorff and consider two cases in which bets are continuous functions and bounded continuous functions respectively

Suggested Citation

  • Ngai-Ching Wong & Man-Chung Ng, 2004. "The No Trade Principle in General Environments," Econometric Society 2004 Far Eastern Meetings 630, Econometric Society.
    • Handle: RePEc:ecm:feam04:630
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    References listed on IDEAS

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    1. Samet, Dov, 1998. "Common Priors and Separation of Convex Sets," Games and Economic Behavior, Elsevier, vol. 24(1-2), pages 172-174, July.
    2. Adam Brandenburger & Eddie Dekel, 2014. "Hierarchies of Beliefs and Common Knowledge," World Scientific Book Chapters, in: The Language of Game Theory Putting Epistemics into the Mathematics of Games, chapter 2, pages 31-41, World Scientific Publishing Co. Pte. Ltd..
    3. Antoine Billot & Alain Chateauneuf & Itzhak Gilboa & Jean-Marc Tallon, 2000. "Sharing Beliefs: Between Agreeing and Disagreeing," Econometrica, Econometric Society, vol. 68(3), pages 685-694, May.
    4. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, vol. 85(3), pages 291-303, June.
    5. Ng, Man-Chung, 2003. "On the duality between prior beliefs and trading demands," Journal of Economic Theory, Elsevier, vol. 109(1), pages 39-51, March.
    6. MERTENS, Jean-François & ZAMIR, Shmuel, 1985. "Formulation of Bayesian analysis for games with incomplete information," LIDAM Reprints CORE 608, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Milgrom, Paul & Stokey, Nancy, 1982. "Information, trade and common knowledge," Journal of Economic Theory, Elsevier, vol. 26(1), pages 17-27, February.
    8. Bhattacharyya, Sugato & Lipman, Barton L, 1995. "Ex ante versus Interim Rationality and the Existence of Bubbles," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(3), pages 469-494, November.
    9. Morris, Stephen, 1994. "Trade with Heterogeneous Prior Beliefs and Asymmetric Information," Econometrica, Econometric Society, vol. 62(6), pages 1327-1347, November.
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    Cited by:

    1. Dimpho Malebogo Matlhola & Ruishan Chen, 2020. "Telecoupling of the Trade of Donkey-Hides between Botswana and China: Challenges and Opportunities," Sustainability, MDPI, vol. 12(5), pages 1-10, February.

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    More about this item

    Keywords

    No Trade Principle; common priors; duality; completely regular Hausdorff; Separation Theorem;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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