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Piecewise additivity for non-expected utility

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  • Craig 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

Suggested Citation

  • Craig Webb, 2015. "Piecewise additivity for non-expected utility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(2), pages 371-392, October.
  • Handle: RePEc:spr:joecth:v:60:y:2015:i:2:p:371-392
    DOI: 10.1007/s00199-015-0871-1
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    More about this item

    Keywords

    Optimism; Pessimism; Inverse-S; Choquet expected utility; NEO-additive capacities; Probabilistic sophistication; D81;
    All these keywords.

    JEL classification:

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

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