Choices under ambiguity with familiar and unfamilar outcomes

Marcello Basili, Alain Chateauneuf and Fulvio Fontini

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This paper considers a decision-making process under ambiguity in which the decision-maker is supposed to split outcomes between familiar and unfamiliar ones. She is assumed to behave differently with respect to unfamiliar gains, unfamiliar losses and customary (familiar) outcomes. In particular, she is supposed to be pessimistic on gains, optimistic on losses and ambiguity neutral on the familiar outcomes. A generalization of the usual Choquet Integral is formalized when the decision maker holds capacities and probabilities. A characterization of the decision-maker's behavior is provided for a specific subset of capacities, in which it is shown that the decision-maker underestimates the unfamiliar outcomes while is linear in probabilities on customary ones.

Keywords: ambiguity; capacity; choquet integral; representation theorem; cumulative prospect theory (search for similar items in EconPapers)
Date: 2005-03
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Citations: View citations in EconPapers (4)

Published in Theory and Decision, 2005, 58 (2), pp.195-207. ⟨10.1007/s11238-005-5682-6⟩

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Related works:
Journal Article: Choices Under Ambiguity With Familiar And Unfamiliar Outcomes (2005)
Working Paper: Choices under ambiguity with familiar and unfamilar outcomes (2005)
Working Paper: Choices under ambiguity with familiar and unfamiliar outcomes (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-00271349

DOI: 10.1007/s11238-005-5682-6

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