Publication detail

The St. Petersburg Paradox and Cardinal Utility Function

Author(s): prof. RNDr. Jiří Hlaváček CSc.,
PhDr. Michal Hlaváček Ph.D.,
Type: IES Working Papers
Year: 2002
Number: 23
ISSN / ISBN:
Published in: IES WP 2002/23
Publishing place: Prague
Keywords:
JEL codes:
Suggested Citation:
Abstract: The St. Petersburg paradox was explained by Von-Neumann a Morgenstern with help of risk aversion of decision-maker. This explanation was based on assumption of concave utility function. This paper provides the explanation based on the probability of downfall of the decision maker, utilizing the Pareto distribution of probability. It corresponds with the proposal, that the dependence between probability of downfall and the relative reserve to existential minimum is linear.
Keywords : St. Petersburg paradox, risk aversion, utility function cardinalization, decision under uncertainty
Downloadable: WP 23

Partners

Deloitte
McKinsey & Company
Moneta Money Bank

Sponsors

CRIF
ČSOB