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Economic Theory

, Volume 9, Issue 1, pp 23–46 | Cite as

Understanding the nonadditive probability decision model

  • Sujoy Mukerji
Research Articles

Summary

The pioneering research of Schmeidler [19] [20] and others identified behavioral axioms that underlie preferences consistent with the maximization of Choquet expected utility. However, these theories do not clarify the link between the epistemics of the decision maker's (DM) problem and his choice. This paper shows that if the DM isaware that his anticipation and perception of future contingencies is incomplete, then his subjective beliefs will be described by a nonadditive probability specification. Further, if the DM acts with a certain notion of caution given the incompleteness in his understanding of the environment, his preferences over acts may have a Choquet expected utility representation. The model developed here thus provides a justification of such beliefs and preferences based on “procedural rationality”. The formalism also allows a simple characterization of how belief representation may change as the DM acquires a clearer picture of the contingency space underlying the uncertain environment.

JEL Classification Number

D81 

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Copyright information

© Springer-Verlag 1997

Authors and Affiliations

  • Sujoy Mukerji
    • 1
  1. 1.Department of EconomicsUniversity of SouthamptonHighfieldUK

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