Economic/Social
Allais Paradox
People violate expected utility theory in predictable ways
Overview
A decision theory paradox showing systematic violations of expected utility axioms.
Choose: A) $1M for sure, or B) 10% chance $5M, 89% chance $1M, 1% nothing. Most choose A. Then choose: C) 11% chance $1M, 89% nothing, or D) 10% chance $5M, 90% nothing. Most choose D. But this violates expected utility theory (preferences should be consistent).