A simple test of expected utility theory using professional traders.
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- Record sourced from PubMed, PMID 15634739.
- Also identified by PMC identifier 545552.
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Abstract
We compare behavior across students and professional traders from the Chicago Board of Trade in a classic Allais paradox experiment. Our experiment tests whether independence, a necessary condition in expected utility theory, is systematically violated. We find that both students and professionals exhibit some behavior consistent with the Allais paradox, but the data pattern does suggest that the trader population falls prey to the Allais paradox less frequently than the student population.
Medical subject headings
- Behavior
- Economics