Piecewise additivity for non-expected utility
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- Webb, C.S. Econ Theory (2015) 60: 371. doi:10.1007/s00199-015-0871-1
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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.