Daniel Thorburn: The Petersburg paradox, financial bubbles and other amusing things
Time: Wed 2014-02-12 13.00 - 14.00
Location: Room B705, Department of statistics, Stockholm university
Participating: Daniel Thorburn, Department of statistics, Stockholm university
The Petersburg paradox is a method to play for example with coins or on the roulette, which seemingly gives a positive return even with negative odds. I will discuss it and why it does not work and in what sense it works. I willl also discuss two other situations; the envelope problem and financial bubbles, which have some traits in common. In all cases there seems to be an advantageous way to make decisions, which from another point of view is counter-intuitive. Even though probability generating functions and other advanced concepts will be mentioned, the presentation will be quite elementary and can easily be followed by anyone having only basic knowledge about probability and means.