A dilemma for Nicolausian discounting.

This article critically examines Nicolausian Discounting, a proposed modification to orthodox decision theory aimed at avoiding "Fanaticism," the problematic implication that agents must always prefer gambles with tiny probabilities of enormous payoffs when utility functions are unbounded. Nicolausian Discounting suggests ignoring outcomes with probabilities below a certain threshold, but the author presents a dilemma showing that any precise procedure to implement this—such as Tail Discounting—either leads to similarly fanatical verdicts or results in intransitive, cyclic preferences. Attempts to resolve this by allowing the threshold to vary with context fail to avoid the dilemma, as they either reintroduce fanatical judgments or cyclic preferences. The paper concludes that without a general framework to vindicate Nicolausian Discounting, one must either accept the costs of Fanaticism inherent in orthodox decision theory or question the viability of normative decision theory itself.