Petersburg paradox-positive expected value of game

Reference no: EM1315913

Assume that the payouts of the game were changed (if necessary) such that it results in gamblers having a positive expected value. Yet people still refuse to play the game. Which of the following must be true?

a. People must be risk averse, and so a positive expected value doesn't necessarily imply a positive expected utility.

b. Such a situation demonstrates the "St. Petersburg paradox".

c. The casino could attract more gamblers by using a 3-sided die instead and setting the ante and payouts so that expected value remains the same, because the variance in payouts would be smaller.

d. The casino shouldn't locate in the "Bible Belt."

e. All the above.

Reference no: EM1315913

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