Journal of Risk and Uncertainty

, Volume 46, Issue 3, pp 247–264 | Cite as

The St. Petersburg Paradox at 300

Article

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.

Keywords

St. Petersburg Paradox Expected utility Games of hazard Risk attitude 

JEL Classifications

D81 B16 

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Department of EconomicsChristian-Albrechts-Universität zu KielKielGermany

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