Testing the Intransitivity Explanation of the Allais Paradox
Theory and Decision 47 (3):229-245 (1999)
Abstract
This paper uses a two-dimensional version of a standard common consequence experiment to test the intransitivity explanation of Allais-paradox-type violations of expected utility theory. We compare the common consequence effect of two choice problems differing only with respect to whether alternatives are statistically correlated or independent. We framed the experiment so that intransitive preferences could explain violating behavior when alternatives are independent, but not when they are correlated. We found the same pattern of violation in the two cases. This is evidence against intransitivity as an explanation of the Allais Paradox. The question whether violations of expected utility are mainly due to intransitivity or to violation of independence is important since it is exactly on this issue the main new decision theories differDOI
10.1023/a:1005177230444
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References found in this work
Theory of Games and Economic Behavior.John von Neumann & Oskar Morgenstern - 1944 - Science and Society 9 (4):366-369.
Regret theory: an alternative theory of rational choice under uncertainty.Graham Loomes & Robert Sugden - 1982 - Economic Journal 92:805–24.
Subjective Probability and Expected Utility without Additivity.David Schmeidler - 1989 - Econometrica 57:571-589.
Prospect Theory: An Analysis of Decision Under Risk.D. Kahneman & A. Tversky - 1979 - Econometrica: Journal of the Econometric Society:263--291.
