Question

Has the Allais Paradox been verified by experimental economics?

Answer 1

The Allais paradox, is a trial set up as pursues, where you are allowed to picked between bets An and B.

Trial 1

Bet 1A

$1 million, 100% Chance

Bet 1B

$1 million, 89% Chance

$0, 1% Chance

$5 million, 10% Chance

Trial 2

Bet 2A

$0, 89% Chance

$1 million, 11% Chance

Bet 2B

$0, 90% Chance

$5 million, 10% Chance

The conundrum emerges when one picks both Gamble 1A and Gamble 2B. This Catch 22 is depicted as a proof or proof of irregularity in von Neumann– Morgenstern utility hypothesis with its status as a "balanced" choice hypothesis. Specifically it is proposed to indicate deficiency of the freedom aphorism of that hypothesis.

In any case, while I find that while {Gamble 1A, Gamble 2B} is an adequate and even alluring arrangement of decisions (which would be consistently conflicting with the hypothesis), this perception doesn't appear to be sufficiently able to demonstrate the hypothesis is preposterous - it appears to be reasonable for contend that in the event that one declined to acknowledge 1% shot of picking up nothing, one would want a 10% more prominent possibility of winning anything (as opposed to picking up nothing) to be the right decision in Experiment 2. At the end of the day, the two decisions {Gamble 1A, Gamble 1B} and {Gamble 2A, Gamble 2B} appear to be splendidly coherent. Truth be told, if all decisions were around a similar utility, the irregularity would vanish (which appears to be altogether conceivable to me).