St. Petersburg paradox
E593494
The St. Petersburg paradox is a famous problem in probability theory and economics that highlights how a lottery with an infinite expected payoff can still attract only a finite price from rational gamblers, challenging traditional notions of expected value and decision-making under risk.
All labels observed (1)
| Label | Occurrences |
|---|---|
| St. Petersburg paradox canonical | 1 |
Statements (49)
| Predicate | Object |
|---|---|
| instanceOf |
paradox in decision theory
ⓘ
paradox in economics ⓘ paradox in probability theory ⓘ |
| analyzedBy | Daniel Bernoulli NERFINISHED ⓘ |
| challenges |
classical expected value theory
ⓘ
use of expected monetary value as sole decision criterion ⓘ |
| describes | lottery game with potentially infinite payoff ⓘ |
| earlierVersionProposedBy | Nicolas Bernoulli NERFINISHED ⓘ |
| field |
decision theory
ⓘ
economics ⓘ game theory ⓘ probability theory ⓘ utility theory ⓘ |
| firstPublicationYear | 1738 ⓘ |
| firstPublishedIn | Commentarii Academiae Scientiarum Imperialis Petropolitanae NERFINISHED ⓘ |
| formalizedBy | Daniel Bernoulli NERFINISHED ⓘ |
| hasCoreConcept |
decision-making under risk
ⓘ
diminishing marginal utility of wealth ⓘ expected utility ⓘ infinite expected value ⓘ lottery with infinite expectation ⓘ risk aversion ⓘ unbounded utility function ⓘ |
| hasInfluenced | modern theories of risk and utility ⓘ |
| hasSolutionApproach |
bounded utility hypothesis
ⓘ
expected utility with concave utility function ⓘ finite wealth constraints ⓘ probability weighting and behavioral models ⓘ |
| hasVariant |
finite-horizon St. Petersburg game
NERFINISHED
ⓘ
modified St. Petersburg game with capped payoffs ⓘ |
| illustrates |
difference between expected value and willingness to pay
ⓘ
importance of utility curvature ⓘ limitations of linear utility in modeling choices ⓘ |
| involves |
coin-toss game
ⓘ
geometrically increasing payoffs ⓘ infinite series of expected payoffs ⓘ |
| motivated |
concept of risk aversion in economics
ⓘ
development of expected utility theory ⓘ introduction of utility functions for wealth ⓘ |
| namedAfter | Saint Petersburg NERFINISHED ⓘ |
| relatedConcept |
expected utility hypothesis
ⓘ
expected value ⓘ lottery (probability theory) ⓘ paradoxes of rational choice ⓘ risk premium ⓘ utility of wealth ⓘ |
| usedIn |
teaching of decision theory
ⓘ
teaching of microeconomics ⓘ teaching of probability theory ⓘ |
Referenced by (1)
Full triples — surface form annotated when it differs from this entity's canonical label.