Maurice Allais: 2 ideas and puzzles worth knowing

2 ideas and puzzles from Maurice Allais, each explained in a minute and credited to the original work. Free on Savvy.

A simple pair of bets broke the leading theory of rational choice
Offered a choice between a certain win and a slightly-better probable win, most people pick the certainty. But offered the same gamble structured as two probable outcomes instead, …
— Maurice Allais, Le Comportement de l'Homme Rationnel devant le Risque
Offered the same prizes twice, most people flip their own stated preference
Choice 1: a certain $1 million, or a 10% shot at $5 million (89% at $1 million, 1% at nothing). Most pick the certain million. Choice 2: an 11% shot at $1 million versus a 10% shot…
— Maurice Allais, Le comportement de l'homme rationnel devant le risque

Five ideas worth knowing, every week