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

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  • Chateauneuf, Alain
  • Eichberger, Jürgen
  • 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 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.

Suggested Citation

  • Chateauneuf, Alain & Eichberger, Jürgen & Grant, Simon, 2003. "Choice under uncertainty with the best and worst in mind : neo-additive capacities," Papers 03-10, Sonderforschungsbreich 504.
  • Handle: RePEc:mnh:spaper:2773
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    More about this item

    Keywords

    optimism ; pessimism ; Choquet expected utility ; portfolio choice;
    All these keywords.

    JEL classification:

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

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