IDEAS home Printed from https://ideas.repec.org/a/prg/jnlpol/v2004y2004i1id449p48-60.html
   My bibliography  Save this article

Petrohradský paradox a kardinální funkce užitku
[St Petersburg paradox and cardinal utility function]

Author

Listed:
  • Jiří Hlaváček
  • Michal Hlaváček

Abstract

The St Petersburg paradox could be used as an extreme demonstration of the utility function cardinalisation in case of stochastic utility. In this article we reassume the von Neumann and Mongernstern explanation to this paradox based on the risk aversion expressed by the strict concavity of the expected utility function. We suggest the utility function derived from the Pareto distribution of the probability of downfall of the subject in danger. Our cardinal utility function is based on the economically reasonable economic assumption. In contrast to the other often used cardinal utility functions it does not need the specification of its parameters ad hoc. Other advantage of our utility function is its explanation of the difference in decision making of different "players" in the St Petersburg casino, based on their wealth (including the explanation of the situational risk seeking behaviour of players under the boundary of survival).

Suggested Citation

  • Jiří Hlaváček & Michal Hlaváček, 2004. "Petrohradský paradox a kardinální funkce užitku
    [St Petersburg paradox and cardinal utility function]
    ," Politická ekonomie, University of Economics, Prague, vol. 2004(1), pages 48-60.
  • Handle: RePEc:prg:jnlpol:v:2004:y:2004:i:1:id:449:p:48-60
    as

    Download full text from publisher

    File URL: http://www.vse.cz/polek/download.php?jnl=polek&pdf=449.pdf
    Download Restriction: free of charge

    File URL: http://www.vse.cz/polek/449
    Download Restriction: free of charge

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Steven N. Kaplan & Joshua Rauh, 2013. "It's the Market: The Broad-Based Rise in the Return to Top Talent," Journal of Economic Perspectives, American Economic Association, pages 35-56.
    2. James Lesage & Manfred Fischer, 2008. "Spatial Growth Regressions: Model Specification, Estimation and Interpretation," Spatial Economic Analysis, Taylor & Francis Journals, pages 275-304.
    3. Josh Bivens & Lawrence Mishel, 2013. "The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes," Journal of Economic Perspectives, American Economic Association, pages 57-78.
    4. N. Gregory Mankiw, 2013. "Defending the One Percent," Journal of Economic Perspectives, American Economic Association, pages 21-34.
    5. Jitka Bartošová & Nicholas T. Longford, 2014. "A Study of Income Stability in the Czech Republic by Finite Mixtures," Prague Economic Papers, University of Economics, Prague, pages 330-348.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    St Petersburg paradox; risk aversion; utility function cardinalisation; decisions under uncertainty;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prg:jnlpol:v:2004:y:2004:i:1:id:449:p:48-60. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Frantisek Sokolovsky). General contact details of provider: http://edirc.repec.org/data/uevsecz.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.