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Article Dans Une Revue Economics Bulletin Année : 2008

An Allais paradox for generalized Expected Utility Theories ?

Résumé

This article reports the results of an experiment which aims at providing a test of ordinal independence, a necessary property of Generalized Expected Utility theories such as Rank-Dependent Expected Utility theory (RDEU). Our experiment is based on a modified version of the Allais paradox proposed by Machina, which allows testing ordinal independence restricted to simple lotteries, i.e. the tail-separability property. The results tend to support RDEU models since tail-separability is not violated by 71% of subjects while 73% violate the independence condition of classic Allais paradox. This confirms the relative theoretical soundness of RDEU models over Expected Utility model for the particular context of risk.
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hal-00645882 , version 1 (28-11-2011)

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  • HAL Id : hal-00645882 , version 1

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Laetitia Placido, Olivier L'Haridon. An Allais paradox for generalized Expected Utility Theories ?. Economics Bulletin, 2008, 4 (19), pp.1-6. ⟨hal-00645882⟩
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