The Foundations of a Positive Theory of Choice Involving Risk and a Criticism of the Postulates and Axioms of the American School (1952)

Allais, Maurice

doi:10.1007/978-94-015-7629-1_2

Cited by 258 publications

(145 citation statements)

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“…The idea that risk is a function of shape has been proposed both for theories of risk perception (Luce, 1980;Pollatsek & Tversky, 1970) and for theories of risk preference (Allais, 1979;Coombs, 1975;Hagen, 1969;Markowitz, 1959). In these theories, shape is identified with the statistical moments of the distributions, particularly mean, variance, and skewness Variance is generally considered to be bad (i.e., risky) whereas positive skewness (a predominance of low outcomes with a few high outcomes) has been identified with hope and negative skewness (a predominance of high outcomes with a few low outcomes) has been identified with fear (Hagen, 1969).…”

Section: A Ebw Can We Prqesaeit Risks?mentioning

confidence: 99%

“…The seemingly special status of certainty in risky choice has received a prominent role in several th.ories (Allais, 1979;Kahneman & Tversky, 1979;Machina, 1982), but the mechanism through which certainty effects operate is as yet unclear. One possibility (Kahneman & Tversky, 1979) is that they are instances of subjective category-boundary effects in the perception of probability (see Section II).…”

Section: B Factor 2: Aspiratic Levelmentioning

confidence: 99%

“…Such explanations are obviously ad hoc since they can be called into play anytime the standard psychophysics of the situation cannot explain the preference. The alternative view that subjects sometimes attempt to maximize the probability of achieving aspiration levels has been taken by Allais (1979) and by Lopes (1981). _ Although this view seems to make intuitive sense, it violates the axioms of nu...…”

Section: Shezpas and Otber High Rollersmentioning

confidence: 99%

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Between Hope and Fear: The Psychology of Risk

Lopes

1987

Advances in Experimental Social Psychology

972

621

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Section: A Ebw Can We Prqesaeit Risks?mentioning

confidence: 99%

Section: B Factor 2: Aspiratic Levelmentioning

confidence: 99%

Section: Shezpas and Otber High Rollersmentioning

confidence: 99%

See 1 more Smart Citation

Between Hope and Fear: The Psychology of Risk

Lopes

1987

Advances in Experimental Social Psychology

972

621

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“…We, therefore, wish to avoid descriptive problems of the ancillary assumptions. As regards the first assumption, Allais' (1953) thought experiment provided the first evidence against EU for risk, later confirmed by many empirical studies. It led to the popular prospect theory (Kahneman and Tversky 1979;Tversky and Kahneman 1992).…”

Section: Background (Substantive and Ancillary Assumptions) And Outlinementioning

confidence: 84%

Making the Anscombe-Aumann approach to ambiguity suitable for descriptive applications

Trautmann

Wakker

2018

J Risk Uncertain

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The Anscombe-Aumann (AA) model, originally introduced to give a normative basis to expected utility, is nowadays mostly used for another purpose: to analyze deviations from expected utility due to ambiguity (unknown probabilities). The AA model makes two ancillary assumptions that do not refer to ambiguity: expected utility for risk and backward induction. These assumptions, even if normatively appropriate, fail descriptively. This paper relaxes these ancillary assumptions to avoid the descriptive violations, while maintaining AA's convenient mixture operation. Thus, it becomes possible to test and apply all AA-based ambiguity theories descriptively while avoiding confounds due to violated ancillary assumptions. The resulting tests use only simple stimuli, avoiding noise due to complexity. We demonstrate the latter in a simple experiment where we find that three assumptions about ambiguity, commonly made in AA theories, are violated: reference independence, Han Bleichrodt and Horst Zank made useful comments. An anonymous referee substantially improved the paper. Electronic supplementary materialThe online version of this article (https://doi.org/10.1007/s11166-018-9273-7) contains supplementary material, which is available to authorized users.

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“…One of the earliest and best known examples of systematic violation of linearity in the probabilities (or equivalently, of the independence axiom) is the well-known Allats Paradox (Allais, 1953(Allais, , 1979. This problem involves obtaining the individual's .10 chance of $5,000,000 1 .…”

Section: Violations Of Linearity In the Probabilitiesmentioning

confidence: 99%