Choice under uncertainty with the best and worst in mind: neo-additive capacities

Alain Chateauneuf, Jürgen Eichberger and Simon Grant
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Jürgen Eichberger: Department of Economics - Universität Heidelberg [Heidelberg] = Heidelberg University

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Abstract: We develop the simplest generalization of subjective expected utility that can accommodate both optimistic and pessimistic attitudes towards uncertainty--Choquet expected utility with non-extreme-outcome-additive (neo-additive) capacities. A neo-additive capacity can be expressed as the convex combination of a probability and a special capacity, we refer to as a Hurwicz capacity, that only distinguishes between whether an event is impossible, possible or certain. We show that neo-additive capacities can be readily applied in economic problems, and we provide an axiomatization in a framework of purely subjective uncertainty.

Keywords: Subjective mixtures; Comonotonic preferences; Choquet expected utility; Optimism; Pessimism (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (267)

Published in Journal of Economic Theory, 2007, 137 (1), pp.538-567. ⟨10.1016/j.jet.2007.01.017⟩

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Related works:
Journal Article: Choice under uncertainty with the best and worst in mind: Neo-additive capacities (2007)
Working Paper: Choice under uncertainty with the best and worst in mind: neo-additive capacities (2007)
Working Paper: Choice under uncertainty with the best and worst in mind: neo-additive capacities (2003)
Working Paper: Choice under Uncertainty with the Best and Worst in Mind: Neo-additive Capacities (2003)
Working Paper: Choice under Uncertainty with the Best and Worst in Mind: Neo-additive Capacities (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00271279

DOI: 10.1016/j.jet.2007.01.017

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