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Least convex capacities


  • Larry G. Epstein

    () (Department of Economics, University of Rochester, Harkness Hall, Rochester, NY 14627-0156, USA)

  • Jiankang Zhang

    () (Department of Economics, University of Rochester, Harkness Hall, Rochester, NY 14627-0156, USA)


Debreu proposed the notion of `least concave utility' as a way to disentangle risk attitudes from the certainty preferences embedded in a von-Neumann Morgenstern index. This paper studies preferences under uncertainty, as opposed to risk, and examines a corresponding decomposition of preference. The analysis is carried out within the Choquet expected utility model of preference and is centered on the notion of a least convex capacity.

Suggested Citation

  • Larry G. Epstein & Jiankang Zhang, 1999. "Least convex capacities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 13(2), pages 263-286.
  • Handle: RePEc:spr:joecth:v:13:y:1999:i:2:p:263-286 Note: Received: May 7, 1997; revised version: November 5, 1997

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    References listed on IDEAS

    1. Robert Earle & Karl Schmedders & Tymon Tatur, 2007. "On Price Caps Under Uncertainty," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 93-111.
    2. Natalia Fabra & Nils‐Henrik Fehr & David Harbord, 2006. "Designing electricity auctions," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 23-46, March.
    3. A. Michael Spence, 1979. "Investment Strategy and Growth in a New Market," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 1-19, Spring.
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    5. Peter Cramton & Steven Stoft, 2006. "The Convergence of Market Designs for Adequate Generating Capacity," Papers of Peter Cramton 06mdfra, University of Maryland, Department of Economics - Peter Cramton, revised 2006.
    6. Oren, Shmuel S., 2005. "Generation Adequacy via Call Options Obligations: Safe Passage to the Promised Land," The Electricity Journal, Elsevier, vol. 18(9), pages 28-42, November.
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    8. Severin Borenstein & James. Bushnell & Steven Stoft, 2000. "The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 294-325, Summer.
    9. Robert Wilson, 2002. "Architecture of Power Markets," Econometrica, Econometric Society, vol. 70(4), pages 1299-1340, July.
    10. Green, Richard J & Newbery, David M, 1992. "Competition in the British Electricity Spot Market," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 929-953, October.
    11. Borenstein, Severin & Bushnell, James & Kahn, Edward & Stoft, Steven, 1995. "Market power in California electricity markets," Utilities Policy, Elsevier, vol. 5(3-4), pages 219-236.
    12. Tooraj Jamasb and Michael Pollitt, 2005. "Electricity Market Reform in the European Union: Review of Progress toward Liberalization & Integration," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 11-42.
    13. Bushnell, James & Wolfram, Catherine, 2008. "Electricity Markets," Staff General Research Papers Archive 31547, Iowa State University, Department of Economics.
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    Cited by:

    1. Takao Asano, 2004. "Portfolio Inertia under Ambiguity," ISER Discussion Paper 0609, Institute of Social and Economic Research, Osaka University.
    2. Nishimura, Kiyohiko G. & Ozaki, Hiroyuki, 2004. "Search and Knightian uncertainty," Journal of Economic Theory, Elsevier, vol. 119(2), pages 299-333, December.
    3. Kin Chung Lo, 1998. "Epistemic Conditions for Agreement and Stochastic Independence of epsilon-Contaminated Beliefs," Working Papers 1998_02, York University, Department of Economics.

    More about this item


    Uncertainty · Uncertainty aversion · Choquet expected utility · Capacity · Convex capacity · Risk aversion · Ambiguity · Non-additive probability.;

    JEL classification:

    • C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty


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