The St. Petersburg Paradox and Its Implications for Economic Decision-Making

This article examines the St. Petersburg Paradox from an economic perspective. The purpose of the study was to explore various theoretical resolutions, including expected utility theory, risk aversion, and behavioral economics, and their applications in modern economic decision-making. Methods: The research employs a systematic literature review and comparative analysis of different approaches to resolving the St. Petersburg Paradox. Key methodologies include an evaluation of mathematical models, historical economic theories, and behavioral insights. The study also considers simulations and empirical data on risk perception to understand how individuals and markets respond to uncertain outcomes. Results: The analysis reveals that the paradox highlights the limitations of traditional expected value calculations in economic decision-making. Conclusion: The St. Petersburg Paradox remains a crucial concept in economic theory, illustrating the need for more sophisticated decision-making models beyond expected value maximization. While expected utility theory provides a widely accepted resolution, modern economic research continues to refine risk-based models to account for human behavior and real-world financial constraints.