St. Petersburg Paradox and Failure Probability
نویسندگان
چکیده
منابع مشابه
The St. Petersburg Paradox
The classical St. Petersburg Paradox is discussed in terms of doubling strategies. It is claimed that what was originally thought of as a \paradox" can hardly be considered as very surprising today, but viewed in terms of doubling strategies, we get some results that look paradoxical, at least to the practically oriented investor.
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The St. Petersburg Paradox (SPP), where people are willing to pay only a modest amount for a lottery with infinite expected gain, has been a famous showcase of human (ir)rationality. Since inception multiple solutions have been proposed, including the influential expected utility theory. Criticisms remain due to the lack of a priori justification for the utility function. Here we report a new s...
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The Saint Petersburg Paradox is a well known illustration ofhow the psychology of risk and reward can diverge from the underlying mathematics. In the standard game a fair coin is tossed repeatedly until the first head occurs. The payoff is $1 ifthe game terminates in one flip, $2 ifin two flips, $4 if in three, and so on, doubling the payoff for each additional flip required to obtain the first...
متن کاملCumulative prospect theory and the St. Petersburg paradox
We find that in cumulative prospect theory (CPT) with a concave value function in gains, a lottery with finite expected value may have infinite subjective value. This problem does not occur in expected utility theory. The paradox occurs in particular in the setting and the parameter regime studied by Tversky and Kahneman [15] and in subsequent works. We characterize situations in CPT where the ...
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The St. Petersburg Paradox is a famous economic and philosophical puzzle that has generated numerous conflicting explanations. To shed empirical light on this phenomenon, we examined subjects' bids for one St. Petersburg gamble with a real monetary payment. We found that bids were typically lower than twice the smallest payoff, and thus much lower than is generally supposed. We also examined bi...
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ژورنال
عنوان ژورنال: Physical Review Letters
سال: 2020
ISSN: 0031-9007,1079-7114
DOI: 10.1103/physrevlett.124.245501