Capitalization in the St. Petersburg Game: why statistical distributions matter

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Publication Type pre-print
School or College College of Humanities
Department Philosophy
Creator Thalos, Mariam G.
Other Author Richardson, Oliver
Title Capitalization in the St. Petersburg Game: why statistical distributions matter
Date 2013-01-01
Description In spite of its infinite expectation value, the St. Petersburg game is not only a gamble without supply in the real world, but also one without demand at apparently very reasonable asking prices. We offer a rationalizing explanation of why the St. Petersburg bargain is unattractive on both sides (to both house and player) in the mid-range of prices (finite but upwards of about $4). Our analysis-featuring (1) the already- established fact that the average of finite ensembles of the St. Petersburg game grows with ensemble size but is unbounded, and (2) our own simulation data showing that the debt-to-entry fee ratio rises exponentially-explains why both house and player are quite rational in abstaining from the St. Petersburg game. The house will be unavoidably (and intentionally) exposed to very large ensembles (with very high averages, and so very costly to them), while contrariwise even the well-heeled player is not sufficiently capitalized (as our simulation data reveals) to be able to capture the potential gains from large-ensemble play. (Smaller ensembles, meanwhile, enjoy low means, as others have shown, and so are not worth paying more than $4 to play, even if a merchant were to offer them at such low prices per trial.) Both sides are consequently rational in abstaining from entry into the St. Petersburg market in the mid-range of asking prices. We utilize the concept of capitalization vis-à-vis a gamble to make this case.
Type Text
Publisher Sage Publications
First Page 1
Last Page 23
Language eng
Bibliographic Citation Thalos, M. G., & Richardson, O. (2013). Capitalization in the St. Petersburg Game: why statistical distributions matter. Politics, Philosophy and Economics, 1-23.
Rights Management (c) Sage Publications DOI: 10.1177/1470594X13491792.
Format Medium application/pdf
Format Extent 1,418,267 bytes
Identifier uspace,18179
ARK ark:/87278/s6db8kpq
Setname ir_uspace
Date Created 2013-03-05
Date Modified 2014-10-02
ID 708325
Reference URL https://collections.lib.utah.edu/ark:/87278/s6db8kpq
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