Joint Decisions and The Allais Paradox

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Abstract/Contents

Abstract: This thesis discusses an experiment designed to determine whether the famous Allais paradox is robust to changes in the number of agents per decision. That is, if the Allais gambles are presented to two people who can collaborate, will their preferences tend to be less paradoxical? Or will they systematically violate von-Nuemann Morgenstern (vNM) expected utility theory the same way individuals have been shown to do? Making use of short surveys containing Allais and common-ratio examples over small hypothetical payouts, this study compares the preferences of two types of “agents”: the control agent, a single individual, and the experimental agent, a two-person pair making shared decisions. The results indicate that allowing for collaboration generates a statistically significant reduction in the number of violations of vNM expected utility. Such findings are interpreted as evidence that people in teams tend to gravitate toward an expected utility approach because it facilitates the joint decision-making process.

Type of resource	text
Date created	May 2013

Author	Cortes, Robert
Primary advisor	Bhattacharya, Jay
Degree granting institution	Stanford University, Department of Economics

Subject	Stanford Department of Economics
Subject	couples
Subject	pairs
Subject	collaborations
Subject	Allais
Subject	decision making
Subject	behavior under uncertainty
Subject	experimental economics
Genre	Thesis

Location	https://purl.stanford.edu/xp523cr2701

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Preferred Citation: Cortes, Robert. (2013). Joint Decisions and The Allais Paradox. Stanford Digital Repository. Available at: https://purl.stanford.edu/xp523cr2701

Stanford University, Department of Economics, Honors Theses

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