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Belief-consistent Pareto dominance

Abstract : The classic Pareto criterion claims that all voluntary trades, even on the grounds of heterogeneous beliefs, should be encouraged. I argue that a trade without hope for Pareto improvement remains controversial. I introduce and characterize a notion of belief-consistent Pareto dominance to formalize this argument, which, in addition to unanimity of preferences, requires all rankings in a trade to be supported by some common beliefs that must coincide with the agents’ beliefs about the events on which all agents agree.
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Submitted on : Tuesday, October 20, 2020 - 11:27:51 PM
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Xiangyu Qu. Belief-consistent Pareto dominance. Economic Theory Bulletin, Springer International Publishing, 2020, 8 (2), pp.219-229. ⟨10.1007/s40505-019-00178-0⟩. ⟨hal-02973212⟩



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