TY - JOUR
T1 - Common beliefs and the existence of speculative trade
AU - Neeman, Zvika
PY - 1996/9
Y1 - 1996/9
N2 - This paper shows that if rationality is not common knowledge, the no-trade theorem of Milgrom and Stokey fails to hold. We adopt Monderer and Samet's notion of common p-belief and show that when traders entertain doubts about the rationality of other traders, arbitrarily large volumes of trade as well as rationality may be common p-belief for a large p. Furthermore, rationality and trade may simultaneously be known to arbitrary large (but finite) degree. Journal of Economic Theory Classification numbers: C70, D82, D84.
AB - This paper shows that if rationality is not common knowledge, the no-trade theorem of Milgrom and Stokey fails to hold. We adopt Monderer and Samet's notion of common p-belief and show that when traders entertain doubts about the rationality of other traders, arbitrarily large volumes of trade as well as rationality may be common p-belief for a large p. Furthermore, rationality and trade may simultaneously be known to arbitrary large (but finite) degree. Journal of Economic Theory Classification numbers: C70, D82, D84.
UR - http://www.scopus.com/inward/record.url?scp=0030240498&partnerID=8YFLogxK
U2 - 10.1006/game.1996.0075
DO - 10.1006/game.1996.0075
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AN - SCOPUS:0030240498
SN - 0899-8256
VL - 16
SP - 77
EP - 96
JO - Games and Economic Behavior
JF - Games and Economic Behavior
IS - 1
ER -