St Petersburg Paradox Interview Questions
St Petersburg paradox interview prep for infinite expected value, utility, bankroll limits, and why EV alone can mislead.
Advanced candidates discussing expected value, utility, and risk.
The paradox
The St Petersburg paradox is a game with an infinite theoretical expected value but limited practical willingness to pay.
Why EV explodes
Very large payoffs have tiny probabilities, but their contributions to expected value do not shrink enough in the idealized setup.
Concrete intuition
A game that doubles the payoff each time a fair coin keeps landing heads can create enormous rare payoffs in the model.
Utility and limits
Utility, bankroll, finite counterparties, and practical constraints explain why infinite EV does not imply infinite real-world price.
Interview use
This paradox tests whether you can separate formal expected value from decision-making under risk and constraints.
Common mistakes
Candidates often say the game is worth infinity without discussing assumptions. The interesting part is why that answer is not a practical price.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.