Moral Impossibility in the Petersburg Paradox : A Literature Survey and Experimental Evidence

Abstract

Abstract: The Petersburg gamble constitutes an important paradox in the history of ideas. It has been thought-provoking and led to important developments in the natural and behavioral sciences. The proposed resolutions of the paradox have involved deep reflections about the human mind by some of the most celebrated scientists of the past three centuries. This paper describes the paradox, and focuses on the resolutions that have been advanced in the literature while alluding to the historical context. In particular, Bernoulli’s moral impossibility concept is revisited and discussed. The study contributes experimental data to the discussion of the paradox. The decision-making of subjects is in line with the notion of moral impossibility; in valuing the gamble, people neglect the events that occur only with small probability. The study elicits the size of the probability that experimental subjects seem to neglect when they formulate their willingness-to-pay for the Petersburg gamble. It is argued that this behavior is boundedly rational, as the individual level of moral impossibility can be interpreted as an individual aspiration level in the art of conjecturing.

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