A sequel to P-4940, the author argues that the issue of whether utilities can be unbounded is independent of the considerations surrounding the St. Petersburg paradox. On the one hand, the Bernoulli lottery can be modified so that the utilities are bounded without losing whatever power the classical paradox may have to make a risk-linear utility for money look absurd. On the other hand, the logical challenge that the Bernoulli game raises against unbounded utilities (as distinct from unbelievably large, but mathematically bounded utilities) can be raised just as well in a more basic, non-lottery setting where ordinally ranked outcomes are selected from "menus." An illustrative game called "Blank Check" plays a central role in the discussion.
This report is part of the RAND Corporation Paper series. The paper was a product of the RAND Corporation from 1948 to 2003 that captured speeches, memorials, and derivative research, usually prepared on authors' own time and meant to be the scholarly or scientific contribution of individual authors to their professional fields. Papers were less formal than reports and did not require rigorous peer review.
Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.