Money pumps in the market

Ariel Rubinstein, Ran Spiegler

    Research output: Contribution to journalArticle

    Abstract

    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.

    Original languageEnglish (US)
    Pages (from-to)237-253
    Number of pages17
    JournalJournal of the European Economic Association
    Volume6
    Issue number1
    DOIs
    StatePublished - Mar 2008

    Fingerprint

    Lottery
    Exploitation
    Traders
    Intrinsic value
    Vulnerability
    Assets
    Profit
    Market mechanism
    Speculative trade

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

    Cite this

    Money pumps in the market. / Rubinstein, Ariel; Spiegler, Ran.

    In: Journal of the European Economic Association, Vol. 6, No. 1, 03.2008, p. 237-253.

    Research output: Contribution to journalArticle

    Rubinstein, Ariel ; Spiegler, Ran. / Money pumps in the market. In: Journal of the European Economic Association. 2008 ; Vol. 6, No. 1. pp. 237-253.
    @article{d615d0e8988847628c32630b141ff22d,
    title = "Money pumps in the market",
    abstract = "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.",
    author = "Ariel Rubinstein and Ran Spiegler",
    year = "2008",
    month = "3",
    doi = "10.1162/JEEA.2008.6.1.237",
    language = "English (US)",
    volume = "6",
    pages = "237--253",
    journal = "Journal of the European Economic Association",
    issn = "1542-4774",
    publisher = "Wiley-Blackwell",
    number = "1",

    }

    TY - JOUR

    T1 - Money pumps in the market

    AU - Rubinstein, Ariel

    AU - Spiegler, Ran

    PY - 2008/3

    Y1 - 2008/3

    N2 - 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.

    AB - 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.

    UR - http://www.scopus.com/inward/record.url?scp=40249119881&partnerID=8YFLogxK

    UR - http://www.scopus.com/inward/citedby.url?scp=40249119881&partnerID=8YFLogxK

    U2 - 10.1162/JEEA.2008.6.1.237

    DO - 10.1162/JEEA.2008.6.1.237

    M3 - Article

    VL - 6

    SP - 237

    EP - 253

    JO - Journal of the European Economic Association

    JF - Journal of the European Economic Association

    SN - 1542-4774

    IS - 1

    ER -