Expected Utility Hypotheses and the Allais Paradox Contemporary Disc
Utility theory or, value theory in general, is certainly the cornerstone of decision theory, game theory, microecon~mics, and all social and political theories which deal with public decisions. Recently the American School of utility, founded by von N eum
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THEORY AND DECISION LIBRARY AN INTERNATIONAL SERIES IN THE PHILOSOPHY AND METHODOLOGY OF THE SOCIAL AND BEHAVIORAL SCIENCES
Editors: GERALD EBERLEIN,
University of Technology, Munich
WERNER LEINFELLNER,
University of Nebraska
Editorial Advisory Board: K.
Norwegian School of Economics and Business Administration
BORCH,
M. BUNGE, McGill University
J.
University of Chicago
S. COLEMAN,
W. KROEBER-RIEL,
A.
University of Saarland
RAPOPORT,
University of Toronto
F.
SCHICK,
Rutgers University
A.
SEN,
University of London
W. STEGMULLER, K. SZANIAWSKI,
L. A.
University of Munich University of Warsaw
TONDL,
TVERSKY,
Prague
Stanford University
VOLUME 21
EXPECTED UTILITY HYPOTHESES AND THE ALLAIS PARADOX Contemporary Discussions of Decisions under Uncertainty with Allais' Rejoinder
Edited by
MAURICE ALLAIS Centre d' Analyse Economique, Ecole Nationale Superieure des Mines de Paris Centre National de la Recherche Scientifique
and
OLE HAGEN Oslo Institute of Business Administration, Bedriftsoekonomisk Institutt
SPRINGER-SCIENCE+BUSINESS MEDIA B.Y.
Library of Congress Cataloging in Publication Data
Main entry under title: Expected utility hypotheses and the Allais Paradox. (Theory and decision library; v. 21) Bibliography: p. Includes indexes. 1. Risk--Addresses, essays, lectures. 2. Decision-making--Addresses, essays, lectures. 3. Utility theory--Addresses, essays, lectures. I. Allais, Maurice. II. Hagen, Ole, 1921HB615.E79 658.4'01 79-12137 ISBN 978-90-481-8354-8 ISBN 978-94-015-7629-1 (eBook) DOl 10.1007/978-94-015-7629-1
All Rights Reserved Copyright © 1979 by Springer Science+Business Media Dordrecht Originally published by D. Reidel Publishing Company, Dordrecht, Holland in 1979 Softcover reprint of the hardcover 1st edition 1979 No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any informational storage and retrieval system, without written permission from the copyright owner
TABLE OF CONTENTS
EDITORIAL PREFACE
VII
PART 1/ EDITORIAL INTRODUCTION
MAURICE ALLAIS / OLE HAGEN /
Foreword
Introductory Survey
3 13
PART II/THE 1952 ALLAIS THEORY OF CHOICE INVOLVING RISK
The Foundations of a Positive Theory of Choice involving Risk and a Criticism of the Postulates and Axioms of the American School (For a detailed Table of Contents see p.28)
MAURICE ALLAIS /
27
PART III/THE NEO-BERNOULLIAN POSITION VERSUS THE 1952 ALLAIS THEORY
Y AKOV AMIHUD /
Critical Examination of the New Foundation
of Utility BRUNO DE FINETTI I
J. MARSCHAK /
A Short Confirmation of My Standpoint
149 161
Utilities, Psychological Values, and Decision
Makers OSKAR MORGENSTERN / Y AKOV AMIHUD /
Some Reflections on Utility
A Reply to Allais
v
163 175 185
VI
TABLE OF CONTENTS
PART IV /CONTEMPORARY VIEWS ON THE NEO-BERNOULLIAN THEORY AND THE ALLAIS PARADOX
KARL BORCH /
Utility and Stochastic Dominance
193
Maximizing Expected Utility and the Rule of Long Run Succe
