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.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Bibliography
Allais, M. 1943. A la recherche d’une discipline économique, Première partie: l’économie pure. Ateliers Industria, 920 pp. Second edition under the title Traité d’économie pur Paris: Imprimerie Nationale, 1952, 5 vols. (The second edition is identical to the first, apart from the addition of a new introduction, 63 pp).
Allais, M. 1952a. Fondements d’une théorie positive des choix comportant un risque et critique des postulats et axiomes de l’école Américaine. International Conference on Risk, Centre National de la Recherche Scientifique, May 1952. Colloques Internationaux XL, Econométrie, Paris, 1953, 257–332.
Allais, M. 1952b. The foundations of a positive theory of choice involving risk and a criticism of the postulates and axioms of the American school. English translation of 1952a. In Allais and Hagen (1979), 27–145.
Allais, M. 1952c. Le comportement de l’homme rationnel devant le risque: critique des postulats et axiomes de l’école Américaine. Econometrica 21(4) (1953): 503–546. This paper corresponds to some parts of Allais, 1952a.
Allais, M. 1952d. La psychologie de l’homme rationnel devant le risque – la théorie et l’expérience. Journal de la Société de Statistique de Paris, January–March 1953: 47–73.
Allais, M. 1977. The so-called Allais’ Paradox and rational decisions under uncertainty. In Allais and Hagen (1979), 437–699.
Allais, M. 1978. Editorial introduction, foreword. In Allais and Hagen (1979), 3–11.
Allais, M. 1983. The foundations of the theory of utility and risk. In Progress in decision theory, ed. O. Hagen and F. Wenstop, 3–131. Dordrecht: Reidel, 1984.
Allais, M. 1984a. L’utilité cardinale et sa détermination – hypothèses, méthodes et résultats empiriques. Memoir presented to the Second international conference on foundations of utility and risk theory, Venice, 5–9 June 1984.
Allais, M. 1984b. The cardinal utility and its determination – hypotheses, methods and empirical results. English version of 1984a, in Theory and decision, 1987.
Allais, M. 1984c. Determination of cardinal utility according to an intrinsic invariant model. Abridged version of 1984a, in Recent developments in the foundations of utility and risk theory, ed. L. Daboni et al., 83–120. Dordrecht: Reidel, 1985.
Allais, M. 1985. Three theorems on the theory of cardinal utility and random choice. In Essays in honour of Werner Leinfellner, ed. H. Berghel. Dordrecht: Reidel, 1986.
Allais, M., and O. Hagen, eds. 1979. Expected utility hypotheses and the Allais’ Paradox; contemporary discussions and rational decisions under uncertainty with Allais’ rejoinder. Dordrecht: Reidel.
Amihud, Y. 1974. Critical examination of the new foundation of utility. In Allais and Hagen 1979: 149–160.
Amihud, Y. 1977. A reply to Allais. In Allais and Hagen (1979), 185–190.
Bernoulli, D. 1738. Specimen theoriae novae de mensura sortis. Trans. as ‘Exposition of a new theory on the measurement of risk’. Econometrica 22 (1954): 23–36.
de Finetti, B. 1977. A short confirmation of my standpoint. In Allais and Hagen (1979), 161.
Friedman, M., and J.L. Savage. 1948. The utility analysis of choices involving risk. Journal of Political Economy 56 (August): 279–304.
MacCrimmon, K., and S. Larsson. 1975. Utility theory: Axioms versus paradoxes. In Allais and Hagen (1979), 333–409.
Marschak, J. 1950. Rational behavior, uncertain prospects and measurable utility. Econometrica 18 (2): 111–141.
Marschak, J. 1951. Why ‘should’ statisticians and businessmen maximize moral expectation? In Proceedings of the second Berkeley symposium on mathematical statistics and probability. Berkeley: University of California Press.
Marschak, J. 1977. Psychological values, and decision makers. In Allais and Hagen (1979), 163–175.
Morgenstern, O. 1976. Some reflections on utility. In Allais and Hagen (1979), 175–183.
Samuelson, P. 1952. Utility, preference and probability. International Conference on Risk, Centre National de la Recherche Scientifique, Paris, May 1952. Colloques Internationaux XL, Econométrie, Paris (1953), 141–150.
Savage, L. 1952. An axiomatization of reasonable behavior in the face of uncertainty. International Conference on Risk, Paris, May 1952. Centre National de la Recherche Scientifique, Colloques Internationaux XL, Econométrie, Paris (1953), 29–33.
Savage, L. 1954. The foundations of statistics. New York: Wiley.
von Neumann, J., and O. Morgenstern. 1947. Theory of games and economic behavior. 2nd ed. Princeton: Princeton University Press.
Author information
Authors and Affiliations
Editor information
Copyright information
© 2018 Macmillan Publishers Ltd.
About this entry
Cite this entry
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
Download citation
DOI: https://doi.org/10.1057/978-1-349-95189-5_93
Published:
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-95188-8
Online ISBN: 978-1-349-95189-5
eBook Packages: Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences