Moral Impossibility in the Petersburg Paradox: A Literature Survey and Experimental Evidence

Tibor Neugebauer

LSF Research Working Paper Series from Luxembourg School of Finance, University of Luxembourg

Abstract: The Petersburg paradox has led to much thought for three centuries. This paper describes the paradox, discusses its resolutions advanced in the literature while alluding to the historical context, and presents experimental data. In particular, Bernoulli’s search for " the level of moral impossibility in the Petersburg problem is stressed; beyond this level small probabilities are considered too unlikely to be " relevant for judgment and decision making. In the experiment, the level of moral impossibility is elicited through variations of the gamble-length in the Petersburg gamble. Bernoulli’s conjecture that people neglect small probability events is supported by a statistical power analysis. "Keywords: Petersburg paradox; economic history; bounded rationality; significance level; experimental economics" "Classification-JEL: B3;C44; C9; D8; G1; N0"

Date: 2010
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-his and nep-hpe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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