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The St. Petersburg Paradox

A game with infinite expected value that no one wants to play

Flip Sequence

Click the coin to start!
🪙

Click to flip!

Your Prize

$0
Flip until heads appears!

Your Statistics

0
Games Played
$0
Total Winnings
$0
Average per Game
$0
Best Game
0
Longest Tail Streak
Expected Value
Infinite!

The Game Rules

How It Works

1. A fair coin is flipped until it lands HEADS.
2. If heads appears on flip n, you win $2ⁿ.
3. Heads on flip 1 = $2, flip 2 = $4, flip 3 = $8, etc.

How much would you pay to play this game?

Expected Value Calculation

Flip # Result Probability Prize Expected Contribution
1 H 1/2 $2 $1
2 TH 1/4 $4 $1
3 TTH 1/8 $8 $1
4 TTTH 1/16 $16 $1
n T...TH 1/2ⁿ $2ⁿ $1
Total Expected Value $1 + $1 + $1 + ... = ∞

Every flip contributes exactly $1 to the expected value. Since there are infinitely many possible flips, the sum is INFINITE!

The Paradox

Mathematically, you should pay any finite amount to play this game— even $1 million! But psychological studies show most people won't pay more than $10-25.

Why the huge gap between mathematical expectation and human intuition?

Historical Timeline

1713 - Nicolas Bernoulli first poses the problem to Pierre Rémond de Montmort
1738 - Daniel Bernoulli publishes the paradox and solution in the St. Petersburg Academy, giving it its name
1954 - John von Neumann & Oskar Morgenstern develop modern utility theory, building on Bernoulli's insights
2002 - Daniel Kahneman wins Nobel Prize for Prospect Theory, another approach to this puzzle

Proposed Solutions

📉 Diminishing Marginal Utility

Daniel Bernoulli (1738): The utility of money isn't linear. Winning $1 billion doesn't make you 1000× happier than $1 million. If utility = log(wealth), expected utility becomes finite!

💰 Finite Wealth

No casino has infinite money. If the house has $1 trillion max, the expected value becomes finite (about $40). Real-world constraints matter!

⏱️ Time Limits

Getting 40 tails in a row (needed for a trillion-dollar win) would take impossibly long. Physical time constraints cap the realistic expectation.

🎯 Probability Weighting

Kahneman & Tversky: Humans overweight small probabilities but also ignore extremely tiny ones. Very unlikely huge payoffs get mentally discounted.

🔢 Median vs Mean

The expected value is infinite, but the median outcome is just $2! (50% chance of heads on first flip). Perhaps median matters more than mean.

🧠 Risk Aversion

Even with fair odds, people prefer certainty. The game is extremely high-variance: usually you win $2-4, very rarely you hit jackpots.

The Lesson

The St. Petersburg Paradox reveals that expected value isn't everything. Human decision-making involves utility, risk tolerance, probability perception, and real-world constraints. This insight founded modern behavioral economics and decision theory!