Nainodelac_and_Tarleton_Nick

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The Allais Paradox

Risk and cost of capital introduce very strange twists on expected utility.

Assume that living has a greater expected utility to me than any monetary value. If I need a $20,000 operation within the next 3 hours to live, I have no other funding, and you make me offer 1, it is completely rational and unbiased to take option 1A. It is the difference between a 100% of living and a 97% chance of living.

If I have $1,000,000,000 in the bank and command of legal or otherwise armed forces, I may just have you killed - for I would not tolerate such frivolous philosophizing.