Nonadditive expected utility models were developed for explaining preferences in settings where probabilities cannot be assigned to events. In the absence of probabilities, difficulties arise in the interpretation of likelihoods of events. In this paper we introduce a notion of revealed likelihood that is defined entirely in terms of preferences and that does not require the existence of (subjective) probabilities. Our proposal is that decision weights rather than capacities are more suitable measures of revealed likelihood in rank-dependent expected utility models and prospect theory. Applications of our proposal to the updating of beliefs and to the description of attitudes towards ambiguity are presented.

Chquet-expected, Elsberg paradox, nonadditive probability, prospect theory, rank-dependent utility, updating of beliefs
Criteria for Decision-Making under Risk and Uncertainty (jel D81)
dx.doi.org/1007703002999, hdl.handle.net/1765/23085
ERIM Article Series (EAS)
Journal of Risk and Uncertainty
Erasmus Research Institute of Management

Sarin, R.K, & Wakker, P.P. (1998). Revealed Likelihood and Knightian Uncertainty. Journal of Risk and Uncertainty, 16(3), 223–250. doi:1007703002999