This was, as I recall, the first proposed resolution to the St. Petersburg Paradox; but as pointed out by DanielLC, it doesn’t work because you can then just reformulate the statement in terms of utility, instead of dollars.
Some suggest that having a very aggressively bounded utility function is sufficient to solve the problem- if your utility for the current state of things is .9, and your maximum utility is 1, then the amount you’d gamble for a chance to get a utility of 1 is bounded at a rather low amount. But this might be throwing the baby out with the bathwater, and might be asymmetric in a way you really don’t want to be. It seems like any technique that resists Pascal’s Mugging, where you pay a little to avoid a tiny chance of paying a lot, should also resist paying a little to get a tiny chance of getting a lot. (Now that I say that I’m unsure, but that might be because my mind has different heuristics for blackmail, insurance, and investments.)
This was, as I recall, the first proposed resolution to the St. Petersburg Paradox; but as pointed out by DanielLC, it doesn’t work because you can then just reformulate the statement in terms of utility, instead of dollars.
Some suggest that having a very aggressively bounded utility function is sufficient to solve the problem- if your utility for the current state of things is .9, and your maximum utility is 1, then the amount you’d gamble for a chance to get a utility of 1 is bounded at a rather low amount. But this might be throwing the baby out with the bathwater, and might be asymmetric in a way you really don’t want to be. It seems like any technique that resists Pascal’s Mugging, where you pay a little to avoid a tiny chance of paying a lot, should also resist paying a little to get a tiny chance of getting a lot. (Now that I say that I’m unsure, but that might be because my mind has different heuristics for blackmail, insurance, and investments.)