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St Petersburg paradox

The observation that experimental subjects will only offer to pay a small fee to enter a coin-tossing game with an expected pay-off that is infinite. Consider being offered the chtince to play in a game in which a fair coin is repeatedly tossed until a tail appears.

St Petersburg paradox

The fact that most subjects are willing to pay only a small fee to enter the game can be explained by the diminishing marginal utility of money. There are stronger paradoxes that can be explained only by bounded utility or behavioural economics. See also anomalies.

Reference: Oxford Press Dictonary of Economics, 5th edt.