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Violations of Expected Utility Paradoxes and Anomalies — Behavioral Economics — Kynotic Academy
Ch 3
Violations of Expected Utility Paradoxes and Anomalies
13 min
Imagine a choice: a guaranteed 1 million, a 10% chance of $5 million, and a 1% chance of nothing. The sure thing feels so safe. But what if we tweak the options just a little? Expected utility theory, from the last chapter, says risk preferences should follow a clean mathematical pattern. Yet people break that pattern in predictable ways. This chapter explores those cracks—the paradoxes and anomalies that reshaped how we understand decisions.