experiments. Contrary to the traditional view of expected utility theory, the choices can be explained in large part by previous … outcomes experienced during the game. Risk aversion decreases after earlier expectations have been shattered by unfavorable … outcomes or surpassed by favorable outcomes. Our results point to reference-dependent choice theories such as prospect theory …

payoff of the game. As a result, we are able to resolve the St. Petersburg Paradox even under risk neutrality, i.e., without … recourse to the strong risk aversion represented by a bounded utility function in the expected utility framework …