Abstract
Pursuing a line of thought initiated by Maurice Allais (1979), I consider whether the mean-risk method of decision making introduced by Harry Markowitz (1959) and other resolves Karl Menger's (1934) version of the St. Petersburg paradox. I provide a conditional answer to this question. I demonstrate that given certain plausible assumption about attitudes toward risk, a certain plausible development of the mean-risk method does resolve the paradox. My chief premiss is roughly that in the St. Petersburg gamble the small chances for large prizes create big risks.
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Weirich, P. The St. Petersburg gamble and risk. Theor Decis 17, 193–202 (1984). https://doi.org/10.1007/BF00160983
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DOI: https://doi.org/10.1007/BF00160983