Similarity and decision-making under risk (is there a utility theory resolution to the Allais paradox?)

Ariel Rubinstein

    Research output: Contribution to journalArticlepeer-review

    Abstract

    It is argued that the Allais paradox reveals a certain property of the decision scheme we use to determine the preference of one lottery over another. The decision scheme is based on the use of similarity relations on the probability and prize spaces. It is proved that for every pair of similarity relations there is essentially only one preference consistent with the decision scheme and the similarities. It is claimed that the result shows a basic difficulty in reconciling utility theory with experimental data.

    Original languageEnglish (US)
    Pages (from-to)145-153
    Number of pages9
    JournalJournal of Economic Theory
    Volume46
    Issue number1
    DOIs
    StatePublished - Oct 1988

    ASJC Scopus subject areas

    • Economics and Econometrics

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