Abstract
An uncertain and not just risky situation may be modeled using so-called belief functions assigning lower probabilities to subsets of outcomes. In this article we extend the von Neumann-Morgenstern expected utility theory from probability measures to belief functions. We use this theory to characterize uncertainty neutrality and different degrees of uncertainty aversion.
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We are grateful to Birgit Grodal, Salvatore Modica, David Schmeidler, and an anonymous referee for comments, help, and encouragement. Financial support from the Danish Social Sciences Research Council is acknowledged.
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Hendon, E., Jacobsen, H.J., Sloth, B. et al. Expected utility with lower probabilities. J Risk Uncertainty 8, 197–216 (1994). https://doi.org/10.1007/BF01065372
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DOI: https://doi.org/10.1007/BF01065372