Decomposition-integral: Unifying Choquet and the concave integrals

Yaarit Even, Ehud Lehrer*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

86 Scopus citations

Abstract

This paper introduces a novel approach to integrals with respect to capacities. Any random variable is decomposed as a combination of indicators. A prespecified set of collections of events indicates which decompositions are allowed and which are not. Each allowable decomposition has a value determined by the capacity. The decomposition-integral of a random variable is defined as the highest of these values. Thus, different sets of collections induce different decomposition-integrals. It turns out that this decomposition approach unifies well-known integrals, such as Choquet, the concave and Riemann integral. Decomposition-integrals are investigated with respect to a few essential properties that emerge in economic contexts, such as concavity (uncertainty-aversion), monotonicity with respect to stochastic dominance and translation-covariance. The paper characterizes the sets of collections that induce decomposition-integrals, which respect each of these properties.

Original languageEnglish
Pages (from-to)33-58
Number of pages26
JournalEconomic Theory
Volume56
Issue number1
DOIs
StatePublished - May 2014

Funding

FundersFunder number
Google Inter-university center for Electronic Markets and Auctions
Israel Science Foundation538/11

    Keywords

    • Capacity
    • Choquet integral
    • Concave integral
    • Decision making
    • Decomposition-integral
    • Non-additive probability

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