Is There an Allais Paradox? A Note on its Resolution

Bibliographic Data

ID13670560
AuthorsMichael Emmett Brady (0000-0003-1006-6874, California State University, Long Beach, corresponding author), Howard B Lee (California State University, Long Beach)
Year1989
Volume64
Issue3_suppl
Pages1223-1230
Publication date1989-06-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenuePsychological Reports (JOURNAL)
Journal identifiersISSN: 0033-2941 • E-ISSN: 1558-691X
PublisherSAGE Publishing (PUBLISHER • US)
DOI10.2466/pr0.1989.64.3c.1223
OpenAlexW2076452826
LanguageEN
Citations received4
References cited5

If a decision maker uses J. M. Keynes' “conventional coefficient of risk and weight” in making decisions under conditions of risk and/or uncertainty, then a consistent pattern of ranked outcome results is not paradoxical as proposed by Allais. Similarly, the paradoxical aspects of the “reflection effect” in Kahneman and Tversky's Prospect Theory analysis of the Allais' paradox, also vanishes. The Allais Paradox can only exist when probabilities are used in a decision-making process without a measure of confidence. By incorporating an information base for calculated probabilities the Allais Paradox results are rendered nonparadoxical

Decision theory · Economics · Expected utility hypothesis · Mathematical economics · Microeconomics · Prospect theory · Statistics · Decision-Making and Behavioral Economics · Mathematics · Psychology

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