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Choquet expected discounted utility

Author

Listed:
  • Lorenzo Bastianello

    (LEMMA, Université Paris 2 Panthéon-Assas)

  • José Heleno Faro

    (Insper)

Abstract

We study intertemporal decision making under uncertainty in a purely subjective framework. The concept of stationarity, introduced by Koopmans for deterministic discounted utility, is naturally extended to a framework with uncertainty and plays a central role for both attitudes towards time and uncertainty. We show that a strong stationarity axiom characterizes discounted expected utility. When considerations about correlations across time between uncertain outcomes are taken into account, a weaker stationarity axiom generalizes discounted expected utility to Choquet expected discounted utility, allowing for non-neutral attitudes towards subjective uncertainty.

Suggested Citation

  • Lorenzo Bastianello & José Heleno Faro, 2023. "Choquet expected discounted utility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(4), pages 1071-1098, May.
    • Handle: RePEc:spr:joecth:v:75:y:2023:i:4:d:10.1007_s00199-022-01438-0
    DOI: 10.1007/s00199-022-01438-0
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    Cited by:

    1. Giulio Principi & Peter P. Wakker & Ruodu Wang, 2023. "Antimonotonicity for Preference Axioms: The Natural Counterpart to Comonotonicity," Papers 2307.08542, arXiv.org.

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    More about this item

    Keywords

    Ambiguity; Intertemporal choice; (Choquet) Discounted expected utility; Stationarity; Serial correlation; Uncertainty aversion/seeking;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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