Name
Abstract | ||
|---|---|---|
The St. Petersburg paradox is a centuries-old philosophical puzzle concerning a lottery with infinite expected payoff for which people are only willing to pay a small amount to play. Despite many attempts and several proposals, no generally accepted resolution is yet at hand. In this work, we present the first resource-rational, process-level explanation of this paradox, demonstrating that it can be accounted for by a variant of normative expected utility valuation which acknowledges cognitive limitations. Specifically, we show that Nobandegani et al.'s (2018) metacognitively rational model, sample-based expected utility (SbEU), can account for major experimental findings on this paradox. Crucially, our resolution is consistent with two empirically well-supported assumptions: (a) People use only a few samples in probabilistic judgments and decision-making, and (b) people tend to overestimate the probability of extreme events in their judgment. Our work seeks to understand the St. Petersburg gamble as a particularly risky gamble whose process-level explanation is consistent with a broader process-level model of human decision-making under risk. |
Year | DOI | Venue |
|---|---|---|
2020 | 10.1111/tops.12486 | TOPICS IN COGNITIVE SCIENCE |
Keywords | Field | DocType |
St. Petersburg paradox,Bounded rationality,Rational process models,Expected utility theory,Inference by sampling,Sample-based expected utility model | St. Petersburg paradox,Cognitive science,Expected utility hypothesis,Psychology,Epistemology,Bounded rationality | Journal |
Volume | Issue | ISSN |
12.0 | SP1.0 | 1756-8757 |
Citations | PageRank | References |
0 | 0.34 | 0 |
Authors | ||
2 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Ardavan S Nobandegani | 1 | 0 | 0.34 |
| Thomas R. Shultz | 2 | 82 | 20.94 |