We apply a new approach to a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96. The remarkably good results have strong implications for theories of asset trade. We find that the geography of information heavily determines the pattern of international...

Orthodox decision theory gives no advice to agents who hold two goods to be incommensurate in value because such agents will have incomplete preferences. According to standard treatments, rationality requires complete preferences, so such agents are irrational. Experience shows, however, that...