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The time resolution of the St. Petersburg paradox

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  • Ole Peters

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.

Suggested Citation

  • Ole Peters, 2010. "The time resolution of the St. Petersburg paradox," Papers 1011.4404, arXiv.org, revised Mar 2011.
    • Handle: RePEc:arx:papers:1011.4404
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    Cited by:

    1. Bronshtein, E. & Fatkhiev, O., 2018. "A Note on St. Petersburg Paradox," Journal of the New Economic Association, New Economic Association, vol. 38(2), pages 48-53.
    2. Valerii Salov, 2015. "The Role of Time in Making Risky Decisions and the Function of Choice," Papers 1512.08792, arXiv.org.
    3. Matej Uhr'in & Gustav v{S}ourek & Ondv{r}ej Hub'av{c}ek & Filip v{Z}elezn'y, 2021. "Optimal sports betting strategies in practice: an experimental review," Papers 2107.08827, arXiv.org.
    4. Ole Peters & Alexander Adamou, 2015. "Insurance makes wealth grow faster," Papers 1507.04655, arXiv.org, revised Jul 2017.
    5. Peter N, Bell, 2014. "Optimal Use of Put Options in a Stock Portfolio," MPRA Paper 54394, University Library of Munich, Germany.
    6. Ole Peters & Murray Gell-Mann, 2014. "Evaluating gambles using dynamics," Papers 1405.0585, arXiv.org, revised Jun 2015.
    7. Varma, Jayanth R., 2013. "Time Resolution of the St. Petersburg Paradox: A Rebuttal," IIMA Working Papers WP2013-05-09, Indian Institute of Management Ahmedabad, Research and Publication Department.
    8. Jos'e Cl'audio do Nascimento, 2019. "Decision-making and Fuzzy Temporal Logic," Papers 1901.01970, arXiv.org, revised Feb 2019.
    9. Bell, Peter Newton, 2014. "Properties of time averages in a risk management simulation," MPRA Paper 55803, University Library of Munich, Germany.
    10. Mariam Thalos & Oliver Richardson, 2014. "Capitalization in the St. Petersburg game," Politics, Philosophy & Economics, , vol. 13(3), pages 292-313, August.
    11. do Nascimento, José Cláudio, 2021. "The personal wealth importance to the intertemporal choice," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 565(C).
    12. Bell, Peter N, 2014. "A Method for Experimental Events that Break Cointegration: Counterfactual Simulation," MPRA Paper 53523, University Library of Munich, Germany.

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