Back to the St. Petersburg Paradox?
Management Science · 2005 · Volume 51 · Issue 4
Abstract
The conventional parameterizations of cumulative prospect theory do not explain the St. Petersburg paradox. To do so, the power coefficient of an individual’s utility function must be lower than the power coefficient of an individual’s probability weighting function.
Keywords
expected utility theory, cumulative prospect theory, St. Petersburg paradox, power utility, probability weighting
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