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Monetary Services Aggregation under Uncertainty: A Behavioral Economics Extension Using Choquet Expectation

William Barnett (), Qing Han and Jianbo Zhang
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Qing Han: Department of Economics, University of Kansas
Jianbo Zhang: Department of Economics, University of Kansas

No 201806, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: A central tenet of behavioral economics is that the axioms producing expected utility maximization by consumers are too strong to be descriptive of rational behavior. The existing theory of monetary services aggregation under risk assume expected utility maximization. We extend those results to uncertainty under weaker axiomatic assumptions by using Choquet expectations. Choquet integration reduces to Riemann integration as a special case under the stronger assumption of additive probability measure, not accepted in the literature on behavioral economics. Our theoretical results on monetary services aggregation are generalizations of prior results, nested as special cases of our results under stronger behavioral assumptions.

Keywords: Uncertainty Aversion; User Cost; Choquet Expectation; Monetary Aggregation. (search for similar items in EconPapers)
JEL-codes: E41 G12 C43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-evo, nep-mac and nep-upt
Date: 2018-08, Revised 2018-08
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