Russon and Chang simulated St. Petersburg games and found that their results were inconsistent with their theoretical predictions. In this article, the theoretical outcomes are derived this time using the methodology suggested by Daniel Bernoulli, and games are then simulated. When this is done, it is found that the theoretical and empirical results are consistent.
Aase, K. K. (2001). On the St. Petersburg paradox. Scandinavian Actuarial Journal, 1, 69-78.
2.
Bernoulli, D. (1954). Exposition of a new theory on the measurement of risk. Econometrica, 22, 23-36. (Original work published 1738)
3.
Russon, M. G., & Chang, S. J. (1992). Risk aversion and practical expected value: A simulation of the St. Petersburg game. Simulation & Gaming, 23, 6-19.
4.
Samuelson, P. A. (1977). St. Petersburg paradoxes: Defanged, dissected and historically described. Journal of Economic Literature, 15, 24-55.
5.
Schoemaker, P. J. H. (1982). The expected utility model: Its variants, purposes, evidence and limitations. Journal of Economic Literature, 20, 529-536.
6.
Starmer, C. (2000). Developments in non-expected utility theory: The hunt for a descriptive theory of choice under risk. Journal of Economic Literature, 30, 332-382.
7.
Todhunter, I. (1949). A history of the mathematical theory of probability—From the time of Pascal to that of LaPlace. New York: Chelsea Publishing Co. (Original work published 1865)
