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... the Paradox relies on a cardinal utility scale, von Neumann and Morgenstern (1947) derived the EU hypothesis from a set of preference axioms based on the assumption of individual rationality. In order to evaluate the relevance and accuracy of EU predictions comparing it to empirical finding and alternative choice theories, I will briefly present these axioms and EU derivation. Choice under risk is modelled as following: Note, to begin with, that risk in this respect has to be distinguished from simple uncertainty in so far as individuals are able to assign known and well-defined probabilities to all future prospects, i.e. they have a well-defined choice set based on clear probability distributions concerning the likelihood of each prospect. This is in contrast to choice under uncertainty where individuals cannot assign precise probabilities (Starmer, 2000). 1) Define a set of certain prospects (outcomes), X and assume that a certain prospect can always be characterized ...