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Money pumps in the market

Rubinstein, A.; Spiegler, R.; (2008) Money pumps in the market. Journal of the European Economic Association , 6 (1) pp. 237-253. 10.1162/JEEA.2008.6.1.237. Green open access


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Agents who employ non-rational choice procedures are often vulnerable to exploitation, in the sense that a profit-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 in an inter-temporal market mechanism, in the form of speculative trade in an asset of no intrinsic value.

Type: Article
Title: Money pumps in the market
Open access status: An open access version is available from UCL Discovery
DOI: 10.1162/JEEA.2008.6.1.237
Publisher version: http://dx.doi.org/10.1162/JEEA.2008.6.1.237
Language: English
Additional information: © 2008 by the European Economic Association
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/17313
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