Figure 3.3: A probability triangle diagram of the Allais Paradox X3 = $2,500 increasing P3 0.33...
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Figure 3.3: A probability triangle diagram of the Allais Paradox X3 = $2,500 increasing P3 0.33 A B 0.01 X = $2,400 increasing p1 C D 0.67 X = $0 The first is to choose between Prospect A and Prospect B. The second choice is between Prospect C and Prospect D. Use the diagram to demonstrate (using math) which patterns of choices would be inconsistent with expected utility theory and explain why those patterns of choices are inconsistent with expected utility theory. Figure 3.3: A probability triangle diagram of the Allais Paradox X3 = $2,500 increasing P3 0.33 A B 0.01 X = $2,400 increasing p1 C D 0.67 X = $0 The first is to choose between Prospect A and Prospect B. The second choice is between Prospect C and Prospect D. Use the diagram to demonstrate (using math) which patterns of choices would be inconsistent with expected utility theory and explain why those patterns of choices are inconsistent with expected utility theory.
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