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

  • Chateauneuf, Alain
  • Eichberger, Jurgen
  • Grant, Simon

The concept of a non-extreme-outcome-additive capacity (neo-additive capacity ) is introduced. Neo-additive capacities model optimistic and pessimistic attitudes towards uncer-tainty as observed in many experimental studies. Moreover, neo-additive capacities can be applied easily in economic problems, as we demonstrate by examples. This paper provides an axiomatisation of Choquet expected utility with neo-capacities in a framework of purely subjective uncertainty.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 137 (2007)
Issue (Month): 1 (November)
Pages: 538-567

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Handle: RePEc:eee:jetheo:v:137:y:2007:i:1:p:538-567
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