Allais paradox
E548438
The Allais paradox is a famous decision-making puzzle in behavioral economics that shows how people's choices under risk often violate the expected utility theory, revealing systematic inconsistencies in rational choice models.
Statements (45)
| Predicate | Object |
|---|---|
| instanceOf |
behavioral economics concept
ⓘ
decision-making paradox ⓘ paradox in decision theory ⓘ thought experiment ⓘ |
| category |
paradoxes in economics
ⓘ
paradoxes in probability and decision theory ⓘ |
| challenges |
independence axiom of expected utility theory
ⓘ
rational choice models ⓘ |
| contradicts | expected utility theory ⓘ |
| coreIdea |
people overweight certain outcomes relative to probable ones
ⓘ
preference patterns can be incompatible with a single utility function ⓘ |
| demonstratedBy | pairwise choice problems ⓘ |
| describedIn | “Le comportement de l’homme rationnel devant le risque” NERFINISHED ⓘ |
| field |
behavioral economics
ⓘ
decision theory ⓘ microeconomics ⓘ |
| hasExample |
choice between a sure gain and a high-probability large gain
ⓘ
choice between two risky lotteries with no sure outcome ⓘ |
| illustrates |
certainty effect
ⓘ
context-dependent preferences ⓘ inconsistency in preferences under risk ⓘ preference reversals ⓘ risk aversion for gains ⓘ violations of expected utility maximization ⓘ |
| influenced |
development of prospect theory
ⓘ
non-expected utility models ⓘ |
| involves |
choices between lotteries
ⓘ
monetary gambles ⓘ probabilistic outcomes ⓘ |
| languageOfOriginalPublication | French ⓘ |
| namedAfter | Maurice Allais NERFINISHED ⓘ |
| proposedBy | Maurice Allais NERFINISHED ⓘ |
| publicationYear | 1953 ⓘ |
| relatedTo |
Ellsberg paradox
ⓘ
St. Petersburg paradox NERFINISHED ⓘ independence axiom ⓘ prospect theory NERFINISHED ⓘ |
| shows |
different attitudes to risk across equivalent problems
ⓘ
sensitivity to certainty in outcomes ⓘ systematic preference inconsistencies ⓘ violations of expected utility axioms ⓘ |
| typicalOutcome | majority choice pattern violating independence axiom ⓘ |
| usedIn |
behavioral decision research
ⓘ
experimental economics ⓘ tests of expected utility theory ⓘ |
Referenced by (1)
Full triples — surface form annotated when it differs from this entity's canonical label.
subject surface form:
Prospect theory