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

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  • Chateauneuf, Alain

    (CERMSEM Université Paris I)

  • Eichberger, Jürgen

    (Sonderforschungsbereich 504)

  • Grant, Simon

    (Department of Economics Rice University)

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," Sonderforschungsbereich 504 Publications 03-10, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  • 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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    JEL classification:

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

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