Risk aversion and St. Petersburg paradox

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Difference between Risk aversion and St. Petersburg paradox

Risk aversion vs. St. Petersburg paradox

In economics and finance, risk aversion is the behavior of humans (especially consumers and investors), when exposed to uncertainty, in attempting to lower that uncertainty. The St.

Behavioral economics

Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the economic decisions of individuals and institutions and how those decisions vary from those implied by classical theory.

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Cumulative prospect theory

Cumulative prospect theory (CPT) is a model for descriptive decisions under risk and uncertainty which was introduced by Amos Tversky and Daniel Kahneman in 1992 (Tversky, Kahneman, 1992).

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Daniel Kahneman

Daniel Kahneman (דניאל כהנמן; born March 5, 1934) is an Israeli-American psychologist notable for his work on the psychology of judgment and decision-making, as well as behavioral economics, for which he was awarded the 2002 Nobel Memorial Prize in Economic Sciences (shared with Vernon L. Smith).

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Econometrica

Econometrica is a peer-reviewed academic journal of economics, publishing articles in many areas of economics, especially econometrics.

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Economics

Economics is the social science that studies the production, distribution, and consumption of goods and services.

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Expected utility hypothesis

In economics, game theory, and decision theory the expected utility hypothesis, concerning people's preferences with regard to choices that have uncertain outcomes (gambles), states that if specific axioms are satisfied, the subjective value associated with an individual's gamble is the statistical expectation of that individual's valuations of the outcomes of that gamble.

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Expected value

In probability theory, the expected value of a random variable, intuitively, is the long-run average value of repetitions of the experiment it represents.

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Prospect theory

Prospect theory is a behavioral economic theory that describes the way people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are known (.

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Utility

Within economics the concept of utility is used to model worth or value, but its usage has evolved significantly over time.

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