An Alternative Way of Seeing the Allais‐Type Violations of the Sure‐Thing Principle

Abstract

A weighting or a rank‐dependent weighting function was used by revamped models of risky choice to explain that Allais Paradox arises because people behave so as to maximize overall value rather than EU. The risky choice behavior was, however, simply seen by the equate‐to‐differentiate model as a choice between the best possible outcomes or a choice between the worst possible outcomes. A “judging” task was designed to examine whether the knowledge of paired outcomes will permit prediction of preference. It was shown that the observed choices could be better accounted for by the equate‐to‐differentiate approach revealed by the judging data.

Citation

LI, S. (2004), "An Alternative Way of Seeing the Allais‐Type Violations of the Sure‐Thing Principle", Humanomics, Vol. 20 No. 1, pp. 17-31. https://doi.org/10.1108/eb018890