What Is The Allais Paradox In Behavioral Economics?

The Allais paradox is a phenomenon in decision-making theory in which people’s choices do not always align with expected utility theory. Expected utility theory is a mathematical model that predicts how people should make decisions in order to maximize their expected utility (or satisfaction) from a given choice. However, the Allais paradox shows that people’s choices do not always follow this model, and that they may make decisions that are not consistent with maximizing their expected utility.

The Allais paradox was first identified by French economist Maurice Allais, who observed that people’s choices did not always align with the predictions of expected utility theory. This paradox has been studied extensively by decision-making researchers, and has led to the development of new theories and models to better understand how people make decisions.

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