In light of the Allais Paradoxes, should economists continue to model economic agents as “expected utility maximisers”?
Abstract
In light of the Allais Paradoxes, should economists continue to model economic agents as " expected utility maximisers " ? The conventional approach adopted by economists has been to model economic agents as " expected utility maximisers " using the standard theory of individual choice, the Expected Utility Theory (EUT). This essay investigates whether it is appropriate for economists to continue to model economic agents in this way, or whether the choice problems designed by Maurice Allais in 1953 (the Allais Paradoxes) weaken the credibility of EUT.