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Bugmaster comments on The Allais Paradox - Less Wrong
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Comments (133)
Reread the post; that's not the paradox.
The paradox is that, if you need the 20k to survive, then you should prefer 2A to 2B, because the extra 3k 33% of the time doesn't outweigh an additional 1% chance of dying.
If someone prefers A in both cases, and B in both cases, they can have a consistent utility function. When someone prefers A in one case, and B in another, then they cannot have a consistent utility function.
Right, I didn't mean to imply that it was. But Eliezer seemed to be saying that picking 1A is irrational in general, in addition to the paradox, which is the notion that I was disputing. It's possible that I misinterpreted him, however.
He makes it clearer in comments.
What Caledonian is discussing is the certainty effect- essentially, having a term in your utility function for not having to multiply probabilities to get an expected value. That's different from risk aversion, which is just a statement that the utility function is concave.