An allais paradox for generalized expected utility theories?

Laetitia Placido () and l'Haridon, Olivier ()

Economics Bulletin, 2008, vol. 4, issue 19, pages 1-6

Abstract: This article reports the results of an experiment which aims at providing a test of ordinal independence, a necessary property of Generalized Expected Utility theories such as Rank-Dependent Expected Utility theory (RDEU). Our experiment is based on a modified version of the Allais paradox proposed by Machina, which allows testing ordinal independence restricted to simple lotteries, i.e. the tail-separability property. The results tend to support RDEU models since tail-separability is not violated by 71% of subjects while 73% violate the independence condition of classic Allais paradox. This confirms the relative theoritical soundness of RDEU models over Expected Utility model for the particular context of risk.

JEL-codes: D8 C9 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.accessecon.com/pubs/EB/2008/Volume4/EB-08D80019A.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ebl:ecbull:v:4:y:2008:i:19:p:1-6

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Series data maintained by John P. Conley ().