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Piecewise additivity for non-expected utility

Craig Webb ()

Economic Theory, 2015, vol. 60, issue 2, 371-392

Abstract: A model of choice under purely subjective uncertainty, Piecewise Additive Choquet Expected utility, is introduced. PACE utility allows for optimism and pessimism simultaneously, but represents a minimal departure from expected utility. It can be seen as a continuous version of NEO-expected utility (Chateauneuf et al. in J Econ Theory 137:538–567, 2007 ) and, as such, is especially suited for applications with rich state spaces. The main theorem provides a preference foundation for PACE utility in the Savage framework of purely subjective uncertainty with an arbitrary outcome set. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Optimism; Pessimism; Inverse-S; Choquet expected utility; NEO-additive capacities; Probabilistic sophistication; D81 (search for similar items in EconPapers)
Date: 2015
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