Applied probability

Dutch book

In gambling, a Dutch book or lock is a set of odds and bets, established by the bookmaker, that ensures that the bookmaker will profit—at the expense of the gamblers—regardless of the outcome of the event (a horse race, for example) on which the gamblers bet. It is associated with probabilities implied by the odds not being coherent. In economics, the term usually refers to a sequence of trades that would leave one party strictly worse off and another strictly better off. Typical assumptions in consumer choice theory rule out the possibility that anyone can be Dutch-booked. In philosophy it is used to explore degrees of certainty of beliefs. There is no agreement on the etymology of the term. (Wikipedia).

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