Learning in the Allias Paradox

G. van de Kuilen, P.P. Wakker

Research output: Contribution to journalArticleAcademicpeer-review

15 Citations (Scopus)

Abstract

Whereas both the allais paradox, the first empirical challenge of the classical rationality assumptions, and learning have been the focus of many experimental investigations, no experimental study exists today into learning in the pure context of the allais paradox. This paper presents such a study. We find that choices converge to expected utility maximization if subjects are given the opportunity to learn by both thought and experience, but less so when they learn by thought only. To the extent that genuine preferences should be measured with proper learning and incentives, our study gives the first pure demonstration that irrationalities such as in the allais paradox are less pronounced than often thought.
Original languageEnglish
Pages (from-to)155-164
Number of pages10
JournalJournal of Risk and Uncertainty
Volume33
DOIs
Publication statusPublished - 1 Jan 2006

Cite this