Abstract
Paradoxes of choice are cases where people systematically violate descriptive theory. In the days of classical paradoxes, it was thought that a description of human choice would also be rational. Modern paradoxes are elegantly clear, systematic contradictions between human choices and descriptive theory, which may or may not be deemed rational. Choices that seem paradoxical from the viewpoint of old theories are explained by newer theory. The St Petersburg paradox, in which people prefer a small sum of money rather than play a gamble with infinite expected value, was explained in 1738 by Daniel Bernoulli, who theorized that utility of money is nonlinear. The paradoxes of Allais and Ellsberg showed that human choices do not conform to expected utility or subjective expected utility theory. Rank-dependent expected utility theory could describe the Allais and Ellsberg paradoxes. Birnbaum developed new paradoxes that refute rank-dependent expected utility theory as descriptive of human choice.
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