Experts, Novices, and the St. Petersburg paradox: Is one solution enough?

Abstract

AbstractAlthough the controversy over the correct solution to the St. Petersburg paradox continues in the decision making literature, few of the solutions have been empirically evaluated. Via the development of alternative versions of the St. Petersburg game, we were able to empirically test some of these solutions. Experts and novices behaved in accordance with Treisman's expectation heuristic when bidding for the right to play the various versions of the St. Petersburg game. When subjects were asked their preferences among the game versions. novices continued to behave in accordance with the expectation heuristic but a plurality of experts seemed to follow another strategy. This preference reversal and its implications and possible causes are thoroughly discussed. An alternative theory which mimicks the expectation heuristic is considered, and generalizations of the expectation heuristic and the St. Petersburg Paradox for z‐sided 'coins' (where z is any integer greater than or equal to 2) are presented. It appears that no one solution is yet rich enough for the St. Petersburg paradox.