When David Lewis ( 1986 ) told us that possible worlds were a ‘paradise for philosophers’, he neglected to add that they are a minefield for decision theorists. Possibilities — be they nomological, metaphysical, or epistemic possibilities — have little to do with subjective probabilities, and it is these latter that matter most to decision theory. Bernard Katz and Doris Olin ( 2007 ) have tried to solve the two-envelope problem by appealing to possible worlds and counterfactual conditionals. In this (...) article, I explain why any such attempt is misguided, and why we, qua decision theorists, must focus on the probable rather than the possible. (shrink)

This paper deals with the two-envelope paradox. Two main formulations of the paradoxical reasoning are distinguished, which differ according to the partition of possibilities employed. We argue that in the first formulation the conditionals required for the utility assignment are problematic; the error is identified as a fallacy of conditional reasoning. We go on to consider the second formulation, where the epistemic status of certain singular propositions becomes relevant; our diagnosis is that the states considered do not exhaust the possibilities. (...) Thus, on our approach to the paradox, the fallacy, in each formulation, is found in the reasoning underlying the relevant utility matrix; in both cases, the paradoxical argument goes astray before one gets to questions of probability or calculations of expected utility. (shrink)

The Two Envelopes Problem is a beautiful and quite confusing problem in decision theory which is ca. 35 years old and has provoked at least 150 papers directly addressing the problem and displaying a surprising variety of different responses. This paper finds decisive progress in an approach of Priest and Restall in 2003, contends that the recent papers having appeared since did not really go beyond that paper, argues further that Priest’s and Restall’s solution is still not complete, and proposes (...) a completion of their solution. If the analysis is correct, this work has the potential of laying the Two Envelopes Problem at rest. (shrink)

After explaining the well-known two-envelope paradox by indicating the fallacy involved, we consider the two-envelope problem of evaluating the factual information provided to us in the form of the value contained by the envelope chosen first. We try to provide a synthesis of contributions from economy, psychology, logic, probability theory (in the form of Bayesian statistics), mathematical statistics (in the form of a decision-theoretic approach) and game theory. We conclude that the two-envelope problem does not allow a satisfactory solution. An (...) interpretation is made for statistical science at large. (shrink)

C onsider two contrary conditionals 1 about two envelopes, Ali and Baba: (a) If Ali has more money than Baba, the difference between the amounts in them is $5. (b) If Ali has more money than Baba, the difference between the amounts in them is $10. Can these both be true? The answer is a resounding yes on the standard account of conditionals, which identifies indicative con- ditionals with material conditionals. It is not the same with many other contemporary accounts (...) of c onditionals. They yield a quali- fied negative answer: (a) and (b) are not compatible 2 unless their common antecedent cannot be true. I think this is a wrong answer. The conditionals can both be true while their antecedent states a possibility. This is what I aim to show in this paper. In doing so, I present a solution to Raymond Smullyan’s intriguing version of the two-envelope paradox. (shrink)

Consider this situation: Here are two envelopes. You have one of them. Each envelope contains some quantity of money, which can be of any positive real magnitude. One contains twice the amount of money that the other contains, but you do not know which one. You can keep the money in your envelope, whose numerical value you do not know at this stage, or you can exchange envelopes and have the money in the other. You wish to maximise your money. (...) What should you do?1 Here are three forms of reasoning about this situation, which we shall call.. (shrink)