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

A simple test of expected utility theory using professional traders.

Author information

1
Department of Economics and Agricultural and Resource Economics, University of Maryland, College Park, MD 20742, USA. jlist@arec.umd.edu

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.

PMID:
15634739
PMCID:
PMC545552
DOI:
10.1073/pnas.0408022101
[Indexed for MEDLINE]
Free PMC Article

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