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Monetary services aggregation under uncertainty: A behavioral economics extension using Choquet expectation

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  • Barnett, William A.
  • Han, Qing
  • Zhang, Jianbo

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.

Suggested Citation

  • Barnett, William A. & Han, Qing & Zhang, Jianbo, 2021. "Monetary services aggregation under uncertainty: A behavioral economics extension using Choquet expectation," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 437-447.
  • Handle: RePEc:eee:jeborg:v:182:y:2021:i:c:p:437-447
    DOI: 10.1016/j.jebo.2019.03.026
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    More about this item

    Keywords

    Uncertainty aversion; User cost; Choquet expectation; Monetary aggregation;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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