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1. The discovery of the St. Petersburg Paradox changed the way people thought about risky choices. a) Describe the St. Petersburg gamble. (40 percent of
1. The discovery of the St. Petersburg Paradox changed the way people thought about risky choices. a) Describe the St. Petersburg gamble. (40 percent of marks) b) What is the likelihood that you will earn 8 or more when you play the St. Petersburg gamble? Show your calculation. NOTE: The sum of the first n summands of the geometric series 1/2 + 1/4 + 1/8 + 1/16 ... is 1-(1/2)". (20 percent of marks) c) Why does the St. Petersburg gamble give rise to a "paradox"? Why led the discovery of the St. Petersburg gamble to a change in the way people thought about risky choices? (40 percent of marks) 1. The discovery of the St. Petersburg Paradox changed the way people thought about risky choices. a) Describe the St. Petersburg gamble. (40 percent of marks) b) What is the likelihood that you will earn 8 or more when you play the St. Petersburg gamble? Show your calculation. NOTE: The sum of the first n summands of the geometric series 1/2 + 1/4 + 1/8 + 1/16 ... is 1-(1/2)". (20 percent of marks) c) Why does the St. Petersburg gamble give rise to a "paradox"? Why led the discovery of the St. Petersburg gamble to a change in the way people thought about risky choices? (40 percent of marks)
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