A Concise Resolution to the Two Envelope Paradox

Eric Bliss

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Decision-Making and Behavioral Economics Probability and Statistical Research Bayesian Modeling and Causal Inference

Abstract

In this paper, I will demonstrate a new perspective on the Two Envelope Problem. I hope to show with convincing clarity how the paradox results from an inherent problem pertaining to the interpretation of Bayesian probability. Specifically, a subjective probability that is inconsistent with reality can mislead reasoning based on Bayesian decision theory.

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1989Puzzles: The Other Person's Envelope is Always Greener 1995The Two-Envelope Paradox 2006The exchange paradox: Probabilistic and cognitive analysis of a psychological conundrum 1996On the Fallacy of the Two-Envelopes-Problem 2009An Inside Look at the Two Envelopes Paradox

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