Question

What is the Allais Paradox? How was it discovered?

Answer 1

• 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.