Newcomb`s Problem: Paradox Lost

Menahem Yaari

Discussion Paper Series from The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem

Abstract: An agent needs to decide which of two available actions, A or B, to take. The agent's payoffs are such that A dominates B, i.e., taking A yields a better payoff than taking B, in every contingency. On the other hand, the agent's expected payoffs, given the action taken, are in the reverse order, i.e., E(payoff | B) > E(payoff | A) , which can happen if the probabilities of the various contingencies are not independent of the action being taken. What should the agent do? This dilemma has come to be known as Newcomb's Paradox (Nozick, 1969). The present essay shows that the rule "keep away, as much as possible, from any dominated action" is perfectly consistent with actually taking the dominated action, when appropriate. No paradox.

Pages: 11 pages
Date: 2013-04
New Economics Papers: this item is included in nep-hpe
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