A simple test of expected utility theory using professional traders

Proc Natl Acad Sci U S A. 2005 Jan 18;102(3):945-8. doi: 10.1073/pnas.0408022101. Epub 2005 Jan 5.

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.

Publication types

  • Comparative Study
  • Research Support, Non-U.S. Gov't

MeSH terms

  • Behavior*
  • Economics*
  • Humans
  • Occupations
  • Students