Re: Why do trades occur?
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- not all players do the same level of research
- not all players have the same abilities
- not all players are entirely rational
etc. etc.
Barron
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Point 3 is key... if they're not rational then obviously this question is trivial. But if people ARE rational/intelligent... points 1 and 2 still beg the question...
If I have done less/more research than you or I believe our skills to not be equal, and our valuation of the stock is different, it seems that our valuations should still converge based on the argument presented before.
So if you're more skillful/have done more research than I, given that I am rational I should change my valuation so that it's more similar to yours and so on until they are essentially the same.
idk i thought it was an interesting question. But maybe the main problem is in the assumption that players are rational then... but if the players here are not rational it seems that they'll be broke long term or are incredibly lucky.
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