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| Author: | Neeman, Z. |
| Title: | Common beliefs and the existence of speculative trade |
| Journal: | Games and Economic Behavior
1996 : SEP, VOL. 16:1, p. 77-96 |
| Index terms: | SPECULATION TRADE RATIONAL EXPECTATIONS |
| Language: | eng |
| Abstract: | 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. |
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