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Choice under Uncertainty with the Best and Worst in Mind: Neo-additive Capacities

  • Chateauneuf, Alain

    ()

    (CERMSEM Université Paris I)

  • Eichberger, Jürgen

    ()

    (Sonderforschungsbereich 504)

  • Grant, Simon

    ()

    (Department of Economics Rice University)

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.

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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 03-10.

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Length: 44 pages
Date of creation: 03 Jun 2003
Date of revision:
Handle: RePEc:xrs:sfbmaa:03-10
Note: We would like to thank Michele Cohen, Peter Hartley, Jean-Yves Jaffray, Mark Machina, Klaus Nehring, Matthew Ryan, Jean-Marc Tallon, and Jean-Christophe Vergnaud for extremely stimulating and helpful discussions. Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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