Paper Info
Title
Stopping rules for utility functions and the St. Petersburgh gamble
Abstract
We study, using the St. Petersburg paradox, the risk attitudes expressed by utility functions without the normal continuity and differentiability assumptions. We model the repeated St. Petersburg lottery with two parameters, starting wealth and return ratio, as a stochastic process with a simple control mechanism and the objective of maximizing utility of the outcome. A stopping function expresses the earliest stopping stage; a finite value resolves the paradox. This new approach can measure the risk attitude of discontinuous utilities in only a finite horizon repetition of the lottery, opening the door to new usefulness of the utility concept in modeling. As an Example we give an application to behavior of persons receiving entitlements towards additional income from working.
Year
DOI
Venue
1999
10.1016/S0096-3003(97)10169-2
Applied Mathematics and Computation
Keywords
DocType
Volume
decision analysis,risk analysis,utility theory
Journal
98
Issue
ISSN
Citations 
2-3
Applied Mathematics and Computation
1
PageRank 
References 
Authors
0.48
0
2
Name
Order
Citations
PageRank
Moshe Dror157464.77
Bruce C. Hartman29211.27