Valuing and behavioral tendencies

It is tempting to say that I value a wager W at x provided that I would be willing to pay any amount up to x for W and unwilling to pay an amount larger than x. But that’s not quite right. For often the fact that a wager is being offered to me would itself be relevant information that would affect how I value the wager.

Let’s say that you tossed a fair coin. Then I value a wager that pays ten dollars on heads at five dollars. But if you were to try to sell me that wager for a dollar, I wouldn’t buy it, because your offering it to me at that price would be strong evidence that you saw the coin landing tails.

Thus, if we want to define how much I value a wager at in terms of what I would be willing to pay for it, we have to talk about what I would be willing to pay for it were the fact that the wager is being offered statistically independent of the events in the wager.

But sometimes this conditional does not help. Imagine a wager W that pays $123.45 if p is true, where p is the proposition that at some point in my life I get offered a wager that pays $123.45 on some eventuality. My probability of p is quite low: it is unlikely anybody will offer me such a wager. Consequently, it is right to say that I value the wager at some small amount, maybe a few dollars.

Now consider the question of what I would be willing to pay for W were the fact that the wager is being offered statistically independent of the events in the wager, i.e., independent of p. Since my being offered W entails p, the only way we can have the statistical independence is if my being offered W has credence zero or p has credence one. It is reasonable to say that the closest possible world where one of these two scenarios holds is a world where p has credence one because some wager involving a $123.45 has already been offered to me. In that world, however, I am willing to pay up to $123.45 for W. Yet that is not what I value W at.

Maybe when we ask what we would be willing to pay for a wager, we mean: what we would be willing to pay provided that our credences stayed unchanged despite the offer. But a scenario where our credences stay unchanged despite the offer is a very weird one. Obviously, when an offer is made, your credence that the offer is made goes up, unless you’re seriously irrational. So this new counterfactual question asks us what we would decide in worlds where we are seriously irrational. And that’s not relevant to the question of how we value the wager.

Maybe instead of asking about the prices at which I would accept an offer, I should instead ask about the prices at which I would make an offer. But that doesn't help either. Go back to the fair coin case. I value a wager that pays you ten dollars on heads at negative five dollars. But I might not offer it to you for eight dollars, because it is likely that you would pay eight dollars for this wager only if you actually saw that the coin turned out heads, in which case this would be a losing proposition for me.

The upshot is, I think, that the question of what one values a wager at is not to be defined in terms of simple behavioral tendencies or even simple counterfactualized behavioral tendencies. Perhaps we can do better with a holistic best-fit analysis.