The St. Petersburg paradox despite risk-seeking preferences: an experimental study
Abstract The St. Petersburg paradox is one of the oldest challenges of expected value theory. Thus far, explanations of the paradox aim at small probabilities being perceived as zero and the boundedness of utility of the outcome. This paper provides experimental results showing that neither diminish...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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Springer
2018-10-01
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| Series: | Business Research |
| Subjects: | |
| Online Access: | http://link.springer.com/article/10.1007/s40685-018-0078-y |
| _version_ | 1819119236119789568 |
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| author | James C. Cox Eike B. Kroll Marcel Lichters Vjollca Sadiraj Bodo Vogt |
| author_facet | James C. Cox Eike B. Kroll Marcel Lichters Vjollca Sadiraj Bodo Vogt |
| author_sort | James C. Cox |
| collection | DOAJ |
| description | Abstract The St. Petersburg paradox is one of the oldest challenges of expected value theory. Thus far, explanations of the paradox aim at small probabilities being perceived as zero and the boundedness of utility of the outcome. This paper provides experimental results showing that neither diminishing marginal utility of the outcome nor perception of small probabilities can explain the paradox. We find that even in situations where subjects are risk-seeking, and zeroing-out small probabilities supports risk-taking, the St. Petersburg paradox exists. This indicates that the paradox cannot be resolved by the arguments advanced to date. |
| first_indexed | 2024-12-22T06:01:33Z |
| format | Article |
| id | doaj.art-c8b20f943d0a41c2b7056aa4b9f5a76e |
| institution | Directory Open Access Journal |
| issn | 2198-3402 2198-2627 |
| language | English |
| last_indexed | 2024-12-22T06:01:33Z |
| publishDate | 2018-10-01 |
| publisher | Springer |
| record_format | Article |
| series | Business Research |
| spelling | doaj.art-c8b20f943d0a41c2b7056aa4b9f5a76e2022-12-21T18:36:32ZengSpringerBusiness Research2198-34022198-26272018-10-01121274410.1007/s40685-018-0078-yThe St. Petersburg paradox despite risk-seeking preferences: an experimental studyJames C. Cox0Eike B. Kroll1Marcel Lichters2Vjollca Sadiraj3Bodo Vogt4Andrew Young School of Policy Studies, Georgia State UniversityOtto-von-Guericke-University Magdeburg, Empirical EconomicsOtto-von-Guericke-University Magdeburg, Empirical EconomicsAndrew Young School of Policy Studies, Georgia State UniversityOtto-von-Guericke-University Magdeburg, Empirical EconomicsAbstract The St. Petersburg paradox is one of the oldest challenges of expected value theory. Thus far, explanations of the paradox aim at small probabilities being perceived as zero and the boundedness of utility of the outcome. This paper provides experimental results showing that neither diminishing marginal utility of the outcome nor perception of small probabilities can explain the paradox. We find that even in situations where subjects are risk-seeking, and zeroing-out small probabilities supports risk-taking, the St. Petersburg paradox exists. This indicates that the paradox cannot be resolved by the arguments advanced to date.http://link.springer.com/article/10.1007/s40685-018-0078-yDecision-making under riskSt. Petersburg paradoxRisk-aversion |
| spellingShingle | James C. Cox Eike B. Kroll Marcel Lichters Vjollca Sadiraj Bodo Vogt The St. Petersburg paradox despite risk-seeking preferences: an experimental study Business Research Decision-making under risk St. Petersburg paradox Risk-aversion |
| title | The St. Petersburg paradox despite risk-seeking preferences: an experimental study |
| title_full | The St. Petersburg paradox despite risk-seeking preferences: an experimental study |
| title_fullStr | The St. Petersburg paradox despite risk-seeking preferences: an experimental study |
| title_full_unstemmed | The St. Petersburg paradox despite risk-seeking preferences: an experimental study |
| title_short | The St. Petersburg paradox despite risk-seeking preferences: an experimental study |
| title_sort | st petersburg paradox despite risk seeking preferences an experimental study |
| topic | Decision-making under risk St. Petersburg paradox Risk-aversion |
| url | http://link.springer.com/article/10.1007/s40685-018-0078-y |
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