The Tiomkin School of Economics at Reichman University warmly congratulates Dr. Aluma Dembo on the publication of her research in the Journal of Political Economy, one of the most prestigious and influential journals in economics.
Dr. Dembo’s paper, “Ever Since Allais” (co-authored with Shachar Kariv, Matthew Polisson, and John K.H. Quah), re-examines a fundamental question in economics: do people make decisions under risk in the way standard economic theory predicts?
Classical Expected Utility Theory (EUT) is built on several key principles, among them rationality and independence. Rationality refers to the idea that people’s preferences should be consistent and complete, meaning they can always rank any two options and that their rankings make logical sense. For example, if someone prefers option A to B and B to C, they should also prefer A to C. Independence says that if a person prefers A to B, this preference should not change just because the same extra possibility is added to both choices, a principle famously challenged by the Allais paradox.
Using a carefully designed experiment, Dr. Dembo and her co-authors test how well people’s choices conform to these principles. Their findings reveal that while many people violate the independence axiom, violations of rationality are even more common and often larger. In other words, people frequently make choices that are not just inconsistent with the predictions of expected utility, they sometimes fail to follow even its most basic logic.
This insight has profound implications: it suggests that economic models of decision-making may need to be reconsidered, since real-world behavior often departs from foundational assumptions more deeply than previously thought.
The Tiomkin School of Economics is proud of Dr. Dembo’s achievement and looks forward to her continued contributions to advancing economic thought.