A Simple Axiomatization of Nonadditive Expected Utility

This paper provides an extension of Savage's subjective expected utility theory for decisions under uncertainty. It includes in the set of events both unambiguous events for which probabilities are additive and ambiguous events for which probabilities are permitted to be nonadditive. The main axiom is cumulative dominance, which adapts stochastic dominance to decision making under uncertainty. We derive a Choquet expected utility representation and show that a modification of cumulative dominance leads to the classical expected utility representation. The relationship of our approach with that of Schmeidler, who uses a two-stage formulation to derive Choquet expected utility, is also explored. Our work may be viewed as a unification of Schmeidler (1989) and Gilboa (1987).