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Necktie Paradox

From Wikipedia, the free encyclopedia

Two men are each given a necktie by their wives as a Christmas present. Over drinks they start arguing over who has the more expensive necktie.

They agree to have a wager over it. They will consult their wives and find out which necktie is the most expensive. The terms of the bet are that the man with the more expensive necktie has to give it to the other as a consolation prize.

The first man considers this: The probability of me winning or losing is 50:50. If I lose, then I lose the value of my necktie. If I win, then I win more than the value of my necktie. In other words, I can bet x and have a 50% chance of winning more than x. Therefore it is definitely in my interest to make the wager.

Of course, the second man can consider the wager in exactly the same way; therefore, paradoxically, it is in both men's interest to wager their neckties!

The essence of this paradox is similar to the Two-envelope paradox, and an insight into its solution can be found there.

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