Files
Abstract
We argue that, in the presence of uncertainty, the notion of Pareto dominance is not as compelling as under certainty. In particular, voluntary trade that is based on differences in tastes is commonly accepted as favorable, because no agent involved in it can be wrong about her tastes. By contrast, voluntary trade that is based on incompatible beliefs may indicate that at least one agent is wrong about her beliefs. We propose a weaker, No-Betting, notion of Pareto domination, which requires, on top of unanimity of preference, the existence of shared beliefs that can rationalize such preference for each agent.