Money pumps in the market
Agents who employ non-rational choice procedures are often vulnerable to exploitation, in the sense that a pro�t-seeking trader can offer them a harmful transaction which they will nevertheless accept. We examine 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. We show that the exploitation of such agents can be embedded through speculative trade in a market for an asset of no intrinsic value. However, the market mechanism imposes a limit on the magnitude of exploitat... Mehr ...
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| Dokumenttyp: | Working / discussion paper |
| Erscheinungsdatum: | 2006 |
| Verlag/Hrsg.: |
ESRC Centre for Economic Learning and Social Evolution
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| Schlagwörter: | Bounded rationality / money pumps / dutch books / mar- ket exploitation / speculative trade / S(1) procedure |
| Sprache: | Englisch |
| Permalink: | https://search.fid-benelux.de/Record/base-27051231 |
| Datenquelle: | BASE; Originalkatalog |
| Powered By: | BASE |
| Link(s) : | https://discovery.ucl.ac.uk/id/eprint/14502/1/14502.pdf |
Agents who employ non-rational choice procedures are often vulnerable to exploitation, in the sense that a pro�t-seeking trader can offer them a harmful transaction which they will nevertheless accept. We examine 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. We show that the exploitation of such agents can be embedded through speculative trade in a market for an asset of no intrinsic value. However, the market mechanism imposes a limit on the magnitude of exploitation.