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On the use of capacities in modeling uncertainty aversion and risk aversion

Authors
Journal
Journal of Mathematical Economics
0304-4068
Publisher
Elsevier
Publication Date
Volume
20
Issue
4
Identifiers
DOI: 10.1016/0304-4068(91)90036-s
Disciplines
  • Mathematics

Abstract

Abstract Schmeidler (1989) and Yaari (1987) have proposed models where attitudes towards uncertainty (or risk) are characterized by not necessarily additive probabilities, and are therefore kept separate from attitudes towards wealth. The axiomatics of both models include a comonotonicity axiom the interpretation of which is delicate. Here, assuming as Yaari that the decision maker displays a constant marginal utility of wealth, we show that the comonotonicity axiom can be significantly weakened while being intuitively meaningful, and that it is dispensable when characterizing some forms of strong uncertainty (or risk) aversion. This investigation is performed within a simpler but possibly more intuitive framework than Schmeidler's and Yaari's.

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