Dutch book

In gambling, economics, and the philosophy of probability, a Dutch book or lock is a set of odds and bets that ensures a guaranteed profit (regardless of the outcome being bet on). It is generally used as a thought experiment to motivate Von Neumann–Morgenstern axioms or the axioms of probability by showing they are equivalent to philosophical coherence or Pareto efficiency.

This article is about gambling. For books in the Dutch language, see Dutch literature.

In economics, the term usually refers to a sequence of trades that would leave one party strictly worse off (effectively "burning money"). Typical assumptions in rational choice theory (namely, the Von Neumann–Morgenstern axioms) rule out Dutch books. These assumptions are weakened by behavioral economics.

In philosophy the Dutch book argument is used to explore degrees of certainty in beliefs, showing that rational agents must be Bayesian (i.e. assign probabilities to events).

There is no agreement on the etymology of the term.

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