What is the allegorical meaning of "Paul's Case"?
We need to be careful when using the term allegory in relation to this tale. An allegory is a story where every character and action, and each setting, has a parallel that corresponds to its allegorical meaning. A good example of an allegory would be "How Much Land Does a Man Need?" by Tolstoy. However, this story is not an allegory. Rather its theme is the way in which Paul comes to believe that beauty is something that can only be discovered in illusions instead of reality. For Paul, "the natural nearly always wore the guise of ugliness... a certain element of artificiality seemed to him necessary in beauty."
He is a character who is only happy and alive when he is separated from the grimy reality of life, when he is in the theatre or art galleries. What defines happiness for Paul is when he is able to "lose himself" and forget his middle-class roots and he can somehow enter into the beauty that is represented in the arts. However the result of such extreme escapism is that reality comes to be a fate "worse than jail" for Paul, which helps us to understand the reason behind his suicide at the end of the story. For Paul, this was a welcome release rather than a tragedy.
It would therefore be wrong to classify this story as an allegory. Rather, you need to focus on the symbolism in the story and how Paul as a character functions as a warning of what can happen if we live too much in the world of fantasy.