On money pumps

The question of whether money pump arguments justify standard consistency assumptions about behavior has remained unresolved, partly because of the absence of an appropriate analytical framework. We present a new framework which fills this gap, provide a formal definition of invulnerability to money pumps, and formulate a requirement of maximal opportunism. We show that behavior which satisfies none of the standard consistency assumptions can be both invulnerable and maximally opportunist. We present two conditions which, combined with maximal opportunism, imply the existence of a choice function rationalized by an ordering and satisfying the sure thing principle.