Thinking, Fast and Slow

29: The Fourfold Pattern
and other disasters
: Including exposure to a “Dutch book,” which is a set of gambles that
your incorrect preferences commit you to accept an { to>
puzzle that Allais constructed
: Readers who are familiar with the Allais paradoxes will
recognize that this version is new. It is both much simpler and actually a stronger violation
than the original paradox. The left-hand option is preferred in the first problem. The
second problem is obtained by adding a more valuable prospect to the left than to the
right, but the right-hand option is now preferred.
sorely disappointed
: As the distinguished economist Kenneth Arrow recently described
the event, the participants in the meeting paid little attention to what he called “Allais’s
little experiment.” Personal conversation, March 16, 2011.
estimates for gains
: The table shows decision weights for gains. Estimates for losses were
very similar.
estimated from choices
: Ming Hsu, Ian Krajbich, Chen Zhao, and Colin F. Camerer,
“Neural Response to Reward Anticipation under Risk Is Nonlinear in Probabilities,”
Journal of Neuroscience
29 (2009): 2231–37.
parents of small children
: W. Kip Viscusi, Wesley A. Magat, and Joel Huber, “An
Investigation of the Rationality of Consumer Valuations of Multiple Health Risks,” 
RAND

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Journal of Economics
18 (1987): 465–79.
psychology of worry
: In a rational model with diminishing marginal utility, people should
pay at least two-thirds as much to reduce the frequency of accidents from 15 to 5 units as
they are willing to pay to eliminate the risk. Observed preferences violated this prediction.
not made much of it
: C. Arthur Williams, “Attitudes Toward Speculative Risks as an
Indicator of Attitudes Toward Pure Risks,” 
Journal of Risk and Insurance
33 (1966): 577–
86. Howard Raiffa, 
Decision Analysis: Introductory Lectures on Choices under
Uncertainty
(Reading, MA: Addison-Wesley, 1968).
shadow of civil trials
: Chris Guthrie, “Prospect Theory, Risk Preference, and the Law,”
Northwestern University Law Review
97 (2003): 1115–63. Jeffrey J. Rachlinski, “Gains,
Losses and the Psychology of Litigation,” 
Southern California Law Review
70 (1996):
113–85. Samuel R. Gross and Kent D. Syverud, “Getting to No: A Study of Settlement
Negotiations and the Selection of Cases for Trial,” 
Michigan Law Review
90 (1991): 319–
93.
the frivolous claim
: Chris Guthrie, “Framing Frivolous Litigation: A Psychological
Theory,” 
University of Chicago Law Review
67 (2000): 163–216.