Siegel's paradox is the phenomenon that uncertainty about future prices can theoretically push rational consumers to temporarily trade away their preferred consumption goods (or currency) for non-preferred goods (or currency), as part of a plan to trade back to the preferred consumption goods after prices become clearer. For example, in some models, Americans can expect to earn more American dollars on average by investing in Euros, while Europeans can expect to earn more Euros on average by investing in American dollars. The paradox was identified by economist Jeremy Siegel in 1972.[1]
Like the related two envelopes problem, the phenomenon is sometimes labeled a paradox because an agent can seem to trade for something of equal monetary value and yet, paradoxically, seem at the same time to gain monetary value from the trade. Closer analysis shows that the "monetary value" of the trade is ambiguous but that nevertheless such trades are often favorable, depending on the scenario.