Question

Consider the St. Petersburg Paradox in Example. Suppose that the casino has a total of M =2m dollars, and so it can afford a finite number of coin tosses.

a. How many tosses can the casino afford?
b. Find the expected payoff to the player.
c. How much should a player be willing to pay to play this game?

Answer 1

(a) The Number of tosses X should be less than or equal to the M dollars.

(b) The expected pay off to the player is "m"

(c) To win the player must play for less than "m" dollars.

Explanation:

Other explanation is given in the attach document.