An allais paradox for generalized expected utility theories?

Laetitia Placido () and Olivier L'Haridon

Economics Bulletin, 2008, vol. 4, issue 19, 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: C9 D8 (search for similar items in EconPapers)
Date: 2008-06-27
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: An Allais paradox for generalized Expected Utility Theories ? (2008)
Working Paper: An Allais paradox for generalized Expected Utility Theories ? (2008)
Working Paper: An Allais paradox for generalized Expected Utility Theories ? (2008)
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