The incoherence of agreeing to disagree
The agreeing-to-disagree theorem of Aumann and the no-expected-gain-from-trade theorem of Milgrom and Stokey are reformulated under an operational definition of Bayesian rationality. Common knowledge of beliefs and preferences is achieved through transactions in a contingent claims market, and mutual expectations of Bayesian rationality are defined by the condition of joint coherence, i.e., the collective avoidance of arbitrage opportunities. The existence of a common prior distribution and the impossibility of agreeing to disagree follow from the joint coherence requirement, but the prior must be interpreted as a 'risk-neutral' distribution: a product of probabilities and marginal utilities for money. The failure of heterogenous information to create disagreements or incentives to trade is shown to be an artifact of overlooking the potential role of trade in constructing the initial state of common knowledge. © 1995 Kluwer Academic Publishers.
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- Economic Theory
- 52 Psychology
- 50 Philosophy and religious studies
- 38 Economics
- 22 Philosophy and Religious Studies
- 17 Psychology and Cognitive Sciences
- 14 Economics
Citation
Published In
DOI
EISSN
ISSN
Publication Date
Volume
Issue
Start / End Page
Related Subject Headings
- Economic Theory
- 52 Psychology
- 50 Philosophy and religious studies
- 38 Economics
- 22 Philosophy and Religious Studies
- 17 Psychology and Cognitive Sciences
- 14 Economics