Economics

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, most people flip their preference — even though the underlying odds are mathematically identical. Maurice Allais showed in 1953 that real decisions systematically violate expected utility theory, the standard model of rational choice at the time.

Maurice Allais, Le Comportement de l'Homme Rationnel devant le Risque — Econometrica, 1953

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