Money-pump arguments - Johan E. Gustafsson

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• Suppose that you prefer A to B, B to C, and C to A.
• Your preferences violate Expected Utility Theory by being cyclic.
• Money-pump arguments offer a way to show that such violations are irrational.
• Suppose that you start with A.
• Then you should be willing to trade A for C and then C for B.
• But then, once you have B, you are offered a trade back to A for a small cost.
• Since you prefer A to B, you pay the small sum to trade from B to A.
• But now you have been turned into a money pump.
• You are back to the alternative you started with but with less money.
• This Element shows how each of the axioms of Expected Utility Theory can be defended by money-pump arguments of this kind.