Economic Theory

, Volume 60, Issue 2, pp 371–392

Piecewise additivity for non-expected utility

Research Article

DOI: 10.1007/s00199-015-0871-1

Cite this article as:
Webb, C.S. Econ Theory (2015) 60: 371. doi:10.1007/s00199-015-0871-1

Abstract

A model of choice under purely subjective uncertainty, Piecewise Additive Choquet Expected utility, is introduced. PACE utility allows for optimism and pessimism simultaneously, but represents a minimal departure from expected utility. It can be seen as a continuous version of NEO-expected utility (Chateauneuf et al. in J Econ Theory 137:538–567, 2007) and, as such, is especially suited for applications with rich state spaces. The main theorem provides a preference foundation for PACE utility in the Savage framework of purely subjective uncertainty with an arbitrary outcome set.

Keywords

Optimism Pessimism Inverse-S Choquet expected utility NEO-additive capacities Probabilistic sophistication 

JEL Classification

D81 

Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.Economics, School of Social SciencesThe University of ManchesterManchesterUK

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