Daniel Bernoulli developed expected utility theory to resolve the question of why a construct of this type with an infinite expected value is nonetheless worth very little, the so-called St. Petersburg paradox.
For a construct of this type with only two outcomes, the formula "bp minus q, all over b" gives the Kelly criterion. Ambiguity aversion, which was first demonstrated in an experiment asking participants to value these constructs, is illustrated by the ones central to Daniel Ellsburg's paradox. The study of that paradox and Allais's paradox, which also centers on a set of constructs of this type, led to the development of the "rank-dependent" or "anticipated" theory of John Quiggin. Daniel Bernoulli developed expected utility theory to resolve the question of why a construct of this type with an infinite expected value is nonetheless worth very little, the so-called St. Petersburg paradox. Amos Tversky and Daniel Kahneman illustrated prospect theory with contrasting constructs of this type in which participants become risk-seeking or risk- averse depending on the certainty or possibility effects. For 10 points, name these constructs that can be set up to turn a guaranteed profit if there is a "Dutch book" set of odds.
For a construct of this type with only two outcomes, the formula "bp minus q, all over b" gives the Kelly criterion.
bets [or gambles; or wagers; or lottery games; accept word forms of all answers such as gambling or betting or wagering; prompt on "game" or "investment" or word forms of either]