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I've tried to verify the below statements on wikipedia because I think they're mixed up: https://en.wikipedia.org/wiki/St._Petersburg_paradox#Expected_utility_theory

"For example, with log utility a millionaire should be willing to pay up to $10.94, a person with 1000 should pay up to 5.94, a person with 2 should pay up to 2, and a person with 0.60 should borrow 0.87 and pay up to 1.47."

According to my simulation of results in a spreadsheet, I calculate that a natural logarithm utility function player with an initial wealth of 1000 (not a million) would pay a maximum of 10.95, rounded to the nearest cent, to participate once in the game. Here is a link to my spreadsheet simulation calculations that demonstrate my above findings that a player with 1000 initial wealth will only pay 10.95, not 5.94 as is stated in the wikipedia article. http://www.keithwoodward.com/random/wiki/StPetersburgParadoxBernoulliUtilitySolution.xlsx Apologies if I've made a silly error. Just wanted to check.

keithphw
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  • I don't see what's unclear about this question. I just re-worded it. Please 'unhold' the question. – keithphw May 02 '16 at 10:27
  • The question is a little exhausting to read IMO. Try to replace those links with all the relevant (and only the relevant) pieces of information. Try to split it up properly into bullets, sections, etc, so it will be easy to follow up on you. Try to refrain from dumping large blocks of text into the post. Make it easier on us, so we can help you out. Check out other questions here, there are plenty of good ones... – barak manos May 04 '16 at 14:48
  • Hi @Barak, thanks for your reply. I've used the other stackoverflow style programming forums a lot and this style of question that I pose is normal. I've set out the problem, proposed a solution, and linked the spreadsheet with the answer since it's a simulation that can't be shown in a short post. I'm not sure what more I can do. But thanks for the follow up. – keithphw May 04 '16 at 14:57

1 Answers1

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Solved by the friendly folks Daniel and Sander on the Mathematica forum. Thanks to both.

http://community.wolfram.com/groups/-/m/t/851650

Finally the wikipedia article can now be corrected after being wrong for a decade.

Daniel Fischer
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keithphw
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  • Lol, edited again. Thanks Daniel. Great to see the MathExchange cover-up police are out in force and doing a great job. – keithphw May 06 '16 at 12:02