The time resolution of the St. Petersburg paradox

MaRDI QIDQ2889136zbMATH OpenFDO

Authors Ole Peters

Publication date 4 June 2012

Published in Philosophical Transactions of the Royal Society of London. Series A. Mathematical, Physical and Engineering Sciences (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1011.4404

zbMATH Keywords

utilityergodicityriskSt. Petersburg paradoxexpectation

Mathematics Subject Classification ID

Decision theory (91B06) Utility theory (91B16) Probabilistic games; gambling (91A60)

Abstract: A resolution of the St. Petersburg paradox is presented. In contrast to the standard resolution, utility is not required. Instead, the time-average performance of the lottery is computed. The final result can be phrased mathematically identically to Daniel Bernoulli's resolution, which uses logarithmic utility, but is derived using a conceptually different argument. The advantage of the time resolution is the elimination of arbitrary utility functions.

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