Valuing future cash flows with non separable discount factors and non additive subjective measures: Conditional Choquet Capacities on Time and on Uncertainty
AbstractWe consider future cash flows that are contingent both on dates in time and on uncertain states. The decision maker (DM) values the cash flows according to its decision criterion: Here the payoffs’ expectation with respect to a capacity measure. The subjective measure grasps the DM’s behaviour in front of the future, in the spirit of de Finetti’s (1930) and of Yaari’s (1987) Dual Theory in the case of risk. Decomposition of the criterion into two criteria that represent the DM’s preferences on uncertain payoffs and time contingent payoffs are derived from Ghirardato’s (1997) results. Conditional Choquet integrals are defined by dynamic consistency requirements and conditional capacities are derived, under some conditions on information. In contrast with other models referring to dynamic consistency, ours doesn’t collapse into a linear one because it violates a weak version of consequentialism.
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Bibliographic InfoPaper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 08-09.
Length: 29 pages
Date of creation: Jun 2008
Date of revision: Jun 2008
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Other versions of this item:
- Robert Kast & André Lapied, 2010. "Valuing future cash flows with non separable discount factors and non additive subjective measures: conditional Choquet capacities on time and on uncertainty," Theory and Decision, Springer, vol. 69(1), pages 27-53, July.
- NEP-ALL-2008-07-20 (All new papers)
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