What is the Allais Paradox? How was it discovered?

Solutions

Expert Solution

Allais paradox is an option problem designed by Maurice Allais.
Allais shows a variability of recognised choices with the forecast of expected utility theory.
This paradox is dependent on the fact that certain types of gambling, people prefer certainty to uncertainty.
Allais paradox depicts that when people are pushed for answer in quick time, they frequently give incompatible answers.
Allais represented his paradox as an Example to the Independence axiom.
Which means that if an agent is in curious between simple lotteries and the
Agent is also indifferent between simple lottery with probability and mixed with the same probability.
Allais paradox was discovered by Maurice Allais,a french Ecomomist in 1953
Who represented the most considerable arguments against Expected utility theory.
It came to be known as Allais paradox.
This discovery of utility sparkled by the Allais paradox, helped kahneman win a noble prize in Economics in2002 and contributed to the foundation of the new department of behavioral Economics.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

(A) What is Olber's paradox? (B) Explain how Olber's paradox supports the Big Bang theory. (C)...

(A) What is Olber's paradox? (B) Explain how Olber's paradox supports the Big Bang theory. (C) Name the properties of the Cosmic Background Radiation observed from the Earth. Also, discuss the connection between the Cosmic Background Radiation and the Big Bang theory. (D) Predict how Cosmic Background Radiation will change in the future.

What is meant by the "paradox of leverage?"

What is the voting paradox? Explain the voting paradox in the Business goal game you have...

What is the voting paradox? Explain the voting paradox in the Business goal game you have learned. If you are playing the game as the leader in the group “Right”, what are your best strategies for your group and explain why?

What are your thoughts on the Green Paradox?

How was the fission reaction discovered? (What is “barium fantasy”, and how was fission explained. What...

How was the fission reaction discovered? (What is “barium fantasy”, and how was fission explained. What are specific characteristics of this reaction?)

Explain how the The Twin Paradox paradox arises when we use our everyday experience of space...

Explain how the The Twin Paradox paradox arises when we use our everyday experience of space and time as absolutes. To the best of your ability, resolve the The Twin Paradox paradox.

Explain the diamond-water paradox and find out in the literature how economists have later solved this paradox.

Critical Thinking 1: The diamond-water paradox In “An Inquiry into the Nature and Causes of the Wealth of Nations” published in 1776, Adam Smith wrote: “Nothing is more useful than water: but it will purchase scarcely anything… A diamond, on the contrary, has scarcely any use-value; but a very great quantity of other goods may frequently be had in exchange for it” Explain the diamond-water paradox and find out in the literature how economists have later solved this paradox.

Question