"An Axiomatic Approach to ƒÃ-contamination"

Abstract

Suppose that an economic agent is (1|ƒÃ)~100% certain that uncertainty she faces is characterized by a particular probability measure, but that she has a fear that, with ƒÃ~100% chance, her conviction is completely wrong and she is left perfectly ignorant about the true measure in the present as well as in the future.This situation is often called "ƒÃ-contamination of con dence." The purpose of this paper is to provide a simple set of behavioral axioms under which the decision-maker's preference is represented by the Choquet expected utility with the ƒÃ-contamination of con dence.