Abstract

The money-pump argument aims to show that cyclic preferences are irrational. The argument can be based on a number of different exploitation schemes that vary in what needs to be assumed about the agent. The Standard Money Pump works for myopic and naive agents, but not for sophisticated agents who use backward induction. The Upfront Money Pump works for sophisticated agents, but not for myopic or naive agents. In this paper, I present a new money pump, the Universal Money Pump, that works for myopic, naive, and sophisticated agents. Moreover, the Universal Money Pump (just like the Upfront Money Pump) also works for minimally sophisticated agents who need not assume that they will choose rationally at nodes that can only be reached by irrational choices. This enables an argument that rational preferences are acyclic, which is based on weaker assumptions about dynamic rationality than existing money-pump arguments.