Abstract
The ‘Allais paradox’ is that risk-averse persons’ choices between alternatives tend to vary according to the absolute amounts of potential gain involved in different pairs of alternatives, even though rational choice between alternatives should depend only on how the alternatives differ. But there is no paradox once we accept the non-identity of monetary and psychological values and the importance of the distribution of cardinal utility about its average value.
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Allais, M. (2018). Allais Paradox. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_93
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DOI: https://doi.org/10.1057/978-1-349-95189-5_93
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