The time resolution of the St. Petersburg paradox

Details The time resolution of the St. Petersburg paradox The time resolution of the St. Petersburg paradox

2010-11-19

arxiv.org/abs/1011.4404v2

Phil. Trans. R. Soc. A, vol. 369 no. 1956 4913--4931

Mathematics

Probability

20 pages, 1 figure

Scientific paper

10.1098/rsta.2011.0065

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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