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The St. Petersburg Paradox at 300

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  • Christian Seidl

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Abstract

Nicolas Bernoulli’s discovery in 1713 that games of hazard may have infinite expected value, later called the St. Petersburg Paradox, initiated the development of expected utility in the following three centuries. An account of the origin and the solution concepts proposed for the St. Petersburg Paradox is provided. D’Alembert’s ratio test is used for a uniform treatment of the manifestations of the St. Petersburg Paradox and its solution proposals. It is also shown that a St. Petersburg Paradox can be solved or regained by appropriate transformations of the winnings or their utilities on the one hand or the probabilities on the other. This last feature is novel for the analysis of the St. Petersburg Paradox. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Christian Seidl, 2013. "The St. Petersburg Paradox at 300," Journal of Risk and Uncertainty, Springer, vol. 46(3), pages 247-264, June.
  • Handle: RePEc:kap:jrisku:v:46:y:2013:i:3:p:247-264
    DOI: 10.1007/s11166-013-9165-9
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    File URL: http://hdl.handle.net/10.1007/s11166-013-9165-9
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    References listed on IDEAS

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    9. Tibor Neugebauer, 2010. "Moral Impossibility in the Petersburg Paradox : A Literature Survey and Experimental Evidence," LSF Research Working Paper Series 10-14, Luxembourg School of Finance, University of Luxembourg.
    10. Brito, D. L., 1975. "Becker's theory of the allocation of time and the St. Petersburg Paradox," Journal of Economic Theory, Elsevier, vol. 10(1), pages 123-126, February.
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    Cited by:

    1. repec:kap:theord:v:84:y:2018:i:1:d:10.1007_s11238-017-9636-6 is not listed on IDEAS
    2. Christian Gollier & James Hammitt & Nicolas Treich, 2013. "Risk and choice: A research saga," Journal of Risk and Uncertainty, Springer, vol. 47(2), pages 129-145, October.
    3. Ulrich Schmidt & Christian Seidl, 2014. "Reconsidering the common ratio effect: the roles of compound independence, reduction, and coalescing," Theory and Decision, Springer, vol. 77(3), pages 323-339, October.

    More about this item

    Keywords

    St. Petersburg Paradox; Expected utility; Games of hazard; Risk attitude; D81; B16;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • B16 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Quantitative and Mathematical

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