Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/167837
Authors: 
Powers, Michael R.
Year of Publication: 
2015
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 3 [Year:] 2015 [Issue:] 1 [Pages:] 26-34
Abstract: 
We identify restrictions on a decision maker's utility function that are both necessary and sufficient to preserve dominance reasoning in each of two versions of the Two-Envelope Paradox (TEP). For the classical TEP, the utility function must satisfy a certain recurrence inequality. For the St. Petersburg TEP, the utility function must be bounded above asymptotically by a power function, which can be tightened to a constant. By determining the weakest conditions for dominance reasoning to hold, the article settles an open question in the research literature. Remarkably, neither constant-bounded utility nor finite expected utility is necessary for resolving the classical TEP; instead, finite expected utility is both necessary and sufficient for resolving the St. Petersburg TEP.
Subjects: 
two-envelope paradox
dominance reasoning
von Neumann-Morgenstern utility
heavy-tailed payoffs
boundedness
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Article
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