Le Comportement de l'Homme Rationnel devant le Risque: Critique des Postulats et Axiomes de l'Ecole Americaine

Allais, Maurice

doi:10.2307/1907921

Cited by 3,448 publications

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“…Expected utility theory (EUT) assumes that probabilities are treated linearly and that decisions are based on the utility of each possible outcome, weighted by the probability of its occurrence (Savage, 1954;von Neumann and Morgenstern, 1944). Although EUT remains a foundational assumption in most fields of economics, as well as in game theory, its descriptive accuracy for actual behavior has been repeatedly questioned (Allais, 1953;Kahneman and Tversky, 1979;Wu and Gonzalez, 1996). Several alternatives, including the widely accepted prospect theory (Kahneman and Tversky, 1979;Tversky and Kahneman, 1992), suggest that observed patterns of decision making under risk can, in part, be explained if individuals use probabilities in a nonlinear manner.…”

Section: Discussionmentioning

confidence: 99%

“…Although this assumption leads to a theoretically parsimonious framework for analyzing decision making, behavioral experiments have accumulated considerable evidence against the hypothesis that individuals make decisions as if they weight the utility of each outcome by its objective probability. These results have, in part, led to the formulation of alternatives to expected utility theory, such as prospect theory, rank dependent utility theory, and cumulative prospect theory, in which probabilities are treated in a nonlinear manner (Allais, 1953;Kahneman and Tversky, 1979;Starmer, 2000). Although probability weighting explains a wide range of empirical findings, it is unknown why people behave in this manner, and the underlying neurological mechanisms at work are not understood.…”

Section: Introductionmentioning

confidence: 99%

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Nonlinear neurobiological probability weighting functions for aversive outcomes

Berns¹,

Capra²,

Chappelow³

et al. 2008

NeuroImage

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While mainstream economic models assume that individuals treat probabilities objectively, many people tend to overestimate the likelihood of improbable events and underestimate the likelihood of probable events. However, a biological account for why probabilities would be treated this way does not yet exist. While undergoing fMRI, we presented individuals with a series of lotteries, defined by the voltage of an impending cutaneous electric shock and the probability with which the shock would be received. During the prospect phase, neural activity that tracked the probability of the expected outcome was observed in a circumscribed network of brain regions that included the anterior cingulate, visual, parietal, and temporal cortices. Most of these regions displayed responses to probabilities consistent with nonlinear probability weighting. The neural responses to passive lotteries predicted 79% of subsequent decisions when individuals were offered choices between different lotteries, and exceeded that predicted by behavior alone near the indifference point.

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Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Nonlinear neurobiological probability weighting functions for aversive outcomes

Berns¹,

Capra²,

Chappelow³

et al. 2008

NeuroImage

View full text Add to dashboard Cite

show abstract

“…Specifically, Kahneman and Tversky replicated-and prospect theory addresses-the certainty effect (Allais paradox, Allais, 1953; see Row 1 in Table 1), the reflection effect (following Markowitz, 1952; see Row 2 in Table 1), overweighting of rare events (following Friedman & Savage, 1948;see Row 3 in Table 1), and loss aversion (following Samuelson, 1963; see Row 4 in Table 1). …”

Section: From Anomalies To Forecasts: Toward a Descriptive Model Of Dmentioning

confidence: 99%

“…We focus on the two extreme cases: Amb = 1 implies no initial information concerning these probabilities (they are described with undisclosed fixed parameters), and Amb = 0 implies complete information and no ambiguity (as in Allais, 1953;Kahneman & Tversky, 1979).…”

Section: Space Of Choice Problemsmentioning

confidence: 99%

“…We also had to limit the range of values that each of the 11 dimensions could take, which inevitably added technical constraints to the space of problems we actually studied. For example, abstract framing of choice between gambles (used, e.g., by Allais, 1953;Kahneman & Tversky, 1979), although some were originally demonstrated in different experimental paradigms, such as urns or coin-tosses. To facilitate this examination, we considered, in addition to the 11 dimensions, two framing manipulations ("coin-toss" and "accept/reject") that were suggested by previous studies as important to two of the phenomena (to the St.…”

Section: Space Of Choice Problemsmentioning

confidence: 99%

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From anomalies to forecasts: Toward a descriptive model of decisions under risk, under ambiguity, and from experience.

Erev¹,

Ert

Plonsky³

et al. 2017

Psychological Review

210

258

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Experimental studies of choice behavior document distinct, and sometimes contradictory, deviations from maximization. For example, people tend to overweight rare events in oneshot decisions under risk, and to exhibit the opposite bias when they rely on past experience.The common explanations of these results assume that the contradicting anomalies reflect situation-specific processes that involve the weighting of subjective values and the use of simple heuristics. The current paper analyzes 14 choice anomalies that have been described by different models, including the Allais, St. Petersburg, and Ellsberg paradoxes, and the reflection effect. Next, it uses a choice prediction competition methodology to clarify the interaction between the different anomalies. It focuses on decisions under risk (known payoff distributions) and under ambiguity (unknown probabilities), with and without feedback concerning the outcomes of past choices. The results demonstrate that it is not necessary to assume situation-specific processes. The distinct anomalies can be captured by assuming high sensitivity to the expected return and four additional tendencies: pessimism, bias toward equal weighting, sensitivity to payoff sign, and an effort to minimize the probability of immediate regret. Importantly, feedback increases sensitivity to probability of regret. Simple abstractions of these assumptions, variants of the model Best Estimate And Sampling Tools (BEAST), allow surprisingly accurate ex ante predictions of behavior. Unlike the popular models, BEAST does not assume subjective weighting functions or cognitive shortcuts.Rather, it assumes the use of sampling tools and reliance on small samples, in addition to the estimation of the expected values.

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Women’s Attitudes Toward Invasive and Noninvasive Testing When Facing a High Risk of Fetal Down Syndrome

et al. 2019

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Key Points Question What are the attitudes and decision making concerning invasive and noninvasive prenatal testing in women at high risk of fetal Down syndrome? Findings In a survey study of 2436 pregnant women in France participating in a randomized clinical trial, 4 clusters were identified with different attitudes toward risk taking and extent of information seeking. Decision making was in line with attitudes, and clinical and socioeconomic factors were likely associated with the attitudes identified. Meaning Aversion to ambiguity generated by incomplete information from noninvasive testing as well as aversion to risk of pregnancy loss due to invasive testing played a major role in shaping attitudes and decision making; therefore, pregnant women should receive extensive information on targeted abnormalities by both tests to aid informed decision making.

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Le Comportement de l'Homme Rationnel devant le Risque: Critique des Postulats et Axiomes de l'Ecole Americaine

Cited by 3,448 publications

References 0 publications

Nonlinear neurobiological probability weighting functions for aversive outcomes

Nonlinear neurobiological probability weighting functions for aversive outcomes

From anomalies to forecasts: Toward a descriptive model of decisions under risk, under ambiguity, and from experience.

Women’s Attitudes Toward Invasive and Noninvasive Testing When Facing a High Risk of Fetal Down Syndrome

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