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| Author: | Rubinstein, A. Spiegler, R. |
| Title: | Money pumps in the market |
| Journal: | Journal of the European Economic Association
2008 : MAR, VOL. 6:1, p. 237-253 |
| Index terms: | rationality decision making lotteries |
| Language: | eng |
| Abstract: | Agents who employ non-rational decision procedures are often vulnerable to exploitation. A profit-seeking trader can offer them a harmful transaction which they will nevertheless accept. This paper examines the vulnerability of a procedure for deciding whether to buy a lottery: observe another agent who already bought it and buy the lottery if that agent's experience was positive. The exploitation of such agents can be embedded in an inter-temporal market mechanism, in the form of speculative trade in an asset of no intrinsic value. |
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