ABSTRACT
In this chapter, we describe some implications for economic analysis of a model of decision making under uncertainty which generalizes the expected-utility model acceptedby most economists as a representation of rational behavior. The model we use is the model of expected utility under a nonadditive probability measure, which seeks to distinguish between quantifiable “risks” and unknown “uncertainties.” An axiomatic treatment of the model may be found in Schmeidler (1982,1989), Gilboa (1987), and Gilboa and Schmeidler (1989).
