Varying Changes in Wealth, Probability and Scenario in the Allais Paradox—An Evolutionary Psychology Perspective

Abstract

This paper explores whether the deviant behavior found in the Allais paradox is not a flaw in expected utility theory but rather deep rationality from an evolutionary psychology perspective. The authors designed a new behavioral experiment, setting up three experimental groups by separately changing wealth, probability and scenario in the classic Allais experiments and reserving one control group unchanged. The results showed that the subjects' deviant behaviors were significantly reduced when the magnitude of wealth decreased, changes in scenario led to more systematic deviant behavior in the subjects, and changes in probability had a limited effect on the Allais paradox. Based on demographic characteristics, the authors further found that males were more sensitive to changes in probability, and females were more sensitive to changes in wealth. The subjects with higher educational levels responded more significantly to varying changes, but were also more overconfident. The study reconsidered the deviant behavior in the Allais paradox and provided another perspective from which to rethink so-called irrational behavior.

Keywords: Allais paradox, Evolutionary psychology, Overconfidence, Irrational behavior