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Piecewise Additivity for Nonexpected Utility

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  • Craig S. Webb

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
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  • Craig S. Webb, 2015. "Piecewise Additivity for Nonexpected Utility," Economics Discussion Paper Series 1503, Economics, The University of Manchester.
    • Handle: RePEc:man:sespap:1503
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    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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