The Ellsberg paradox is a paradox in decision theory and experimental economics in which people's choices violate the expected utility hypothesis. One interpretation is that expected utility theory does not properly describe actual human choices.
It is generally taken to be evidence for ambiguity aversion. The paradox was popularized by Daniel Ellsberg, although a version of it was noted considerably earlier by John Maynard Keynes.
Ellsberg raised two problems: 1 urn problem and 2 urn problem. Here, 1 urn problem is described, which is the better known one.
Read more about Ellsberg Paradox: The 1 Urn Paradox
Famous quotes containing the word paradox:
“A good aphorism is too hard for the teeth of time and is not eaten up by all the centuries, even though it serves as food for every age: hence it is the greatest paradox in literature, the imperishable in the midst of change, the nourishment which—like salt—is always prized, but which never loses its savor as salt does.”
—Friedrich Nietzsche (1844–1900)