The St. Petersburg Paradox
A coin-flipping game whose average winnings are infinite. How much of your own money would you actually pay to play?
1713 (posed by Nicolaus Bernoulli), 1738 (published by Daniel Bernoulli)19 min read
Swiss mathematics and physics
Daniel Bernoulli
1700 – 1782
Best known for the principle relating fluid speed to pressure that carries his name. His 1738 St Petersburg paper did something else entirely: it proposed that people value money not by its amount but by a concave function of it, and that "the utility resulting from any small increase in wealth will be inversely proportionate to the quantity of goods previously possessed" — the first statement of diminishing marginal utility, and the seed of modern expected-utility theory.