An axiomatic approach to $\boldsymbol{\varepsilon}$ -contamination

Kiyohiko Nishimura and Hiroyuki Ozaki ()

Economic Theory, 2006, vol. 27, issue 2, 333-340

Abstract: Suppose that an economic agent is $(1-\varepsilon) \times$ 100% certain that uncertainty she faces is characterized by a particular probability measure, but that she has a fear that, with $\varepsilon \times$ 100% chance, her conviction is completely wrong and she is left perfectly ignorant about the true measure in the present as well as in the future. This situation is often called “ $\varepsilon$ -contamination of confidence.” The purpose of this paper is to provide a simple set of behavioral axioms under which the decision-maker’s preference is represented by the Choquet expected utility with the $\varepsilon$ -contamination of confidence. Copyright Springer-Verlag Berlin/Heidelberg 2006

Keywords: $\varepsilon$ -contamination; Choquet expected utility; Representation theorem. (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1007/s00199-004-0584-3

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