Understanding Ramsey-de Finetti Probabilities and the St. Petersburg Paradox

Abstract

We provide simple interpretations of probability with a view towards its potential for real world (i.e., practical) applications. Our discussion is along the lines initiated by David Ramsey and Bruno de Finetti, though we do not provide a theory of probability but merely use their axioms and results to interpret mathematical probability. Subsequently, we provide a critique as well as a resolution of the well-known St. Petersburg paradox that is consistent with expected utility theory.