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

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

Abstract

The concept of a non-extreme-outcome-additive capacity (neo-additive capacity ) is introduced. Neo-additive capacities model optimistic and pessimistic attitudes towards uncertainty 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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  • Chateauneuf, Alain & Eichberger, Jurgen & Grant, Simon, 2007. "Choice under uncertainty with the best and worst in mind: Neo-additive capacities," Journal of Economic Theory, Elsevier, vol. 137(1), pages 538-567, November.
  • Handle: RePEc:eee:jetheo:v:137:y:2007:i:1:p:538-567
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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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