Questions tagged [measuring-utility]

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Estimating the form of a utility function on two or more commodities

I am looking for experiments for estimating the form a utility function of a consumer on two or more commodities. In particular, I would like to know e.g. if the utility function of a consumer is of ...
Erel Segal-Halevi's user avatar
3 votes
2 answers
502 views

How to derive a utility function using indirect utility function?

I am working on this question to solve for utility function. The indirect utility function is given as follows: $V(p_1,p_2,w)=(\frac {1}{p_1} + \frac {1}{p_2})*w$ w stands for income, $p_1$ and $p_2$ ...
Sawitta's user avatar
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Is there a way to assess land value independently of zoning policy?

I am aware that the methods used to assess land value of properties, used by government agencies for taxation, are affected by zoning restrictions. Restrictions on how a lot of land may be used by it'...
Electric-Gecko's user avatar
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2 answers
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Assigning dollar value to intangible costs and benefits

I am trying to develop a framework that a person can use to help them decide where to live. The idea is to assign a dollar value to various attributes (e.g. work opportunities, cost of living, climate,...
Kerrick Staley's user avatar
2 votes
1 answer
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State dependent preferences vs state independent preferences in utility theory

I am working on changes in preferences and found papers on state-independent preference. What is the difference between state-dependent and state-independent preferences and utility functions? What ...
desi arthshastri's user avatar
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1 answer
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Why does Game Theory seem to ignore the impact that collectively altering a player's possible strategies can have on their utility?

A recurring theme I've noticed in Game Theory is the tendency to dish out ideas for collective action, with the stated goal of tipping or forcing society toward a strategy vector with better (perhaps ...
user10478's user avatar
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p-hacking vs. parameter calibration?

I'm currently tasked in my job to design a Prospect Theory (here CPT-)index as mentioned in Barberis, Mukherjee and Wang (2016): "Prospect Theory and Stock Returns: An Empirical Test", see ...
T123's user avatar
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Are standard discrete choice models based on ordinal utility or cardinal utility?

Suppose we model consumer's choice between three brands Honda(choice 1), Toyota(choice 2) and BMW(choice 3) using a standard discrete choice model, with the utility of choice $j\in\{1,2,3\}$ being ...
ExcitedSnail's user avatar
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How to measure utility functions in the stock market

i am looking for some articles on how to identify and estimate utility functions in the stock market. My own search results yielded some papers by Blackburn and Ukhov https://www.researchgate.net/...
T123's user avatar
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Utility Function Challenge

A utility function is given for two goods Good 1 and Good 2 $$U=f({G_1},{G_2})=45{{G_1}^{0.7}}{{G_2}^{0.3}}$$ Did I get this right? the marginal utility functions with respect to G1 and G2 will be ...
user38716's user avatar
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1 answer
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Computing expectation of logit error conditional on choice

Consider a standard multinomial logit choice model. A consumer chooses a good $j$ from a choice set $J$ by choosing the good with the highest realized utility where the utility of good $j$ is given by ...
Smithey's user avatar
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How to determine if people behave optimally with a generic utility function?

I have a some real-world data and a real-world choice for which I know the optimum solution is something like $y^* = u(x)$, where $u(.)$ is some utility function. I have data on $y$ and $x$, so if I ...
aintgeorge's user avatar
2 votes
2 answers
531 views

Is addiction a case of increasing marginal utility?

I got to know that alcohol addiction is a case of increasing marginal utility. My professor refutes me bluntly stating that once a person starts consuming he no longer remains to be a 'rational ...
Dharshan Sagar's user avatar
3 votes
1 answer
177 views

What's special about Cobb–Douglas utility relative to the rest of the CES family?

My question concerns CES utility functions, which have the form $$u(x) = \left(\sum_{j=1}^n a_j x_j^{\rho} \right)^{1/\rho}$$ for utility parameters $a_j$, an elasticity parameter $\rho$, and some ...
Max's user avatar
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1 answer
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Is the expected utility the inverse of the utility function?

Can somebody explain to me if that it's true and also graphically explain it?
Teko JR's user avatar
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812 views

which type of goods maximum utility function represent?

I am not sure, which type of goods does the maximum utility function represent i.e., $U(X_1, X_2) =\max(X_1, X_2)$. As the $U(X_1, X_2) =\min(X_1, X_2)$ represent the complementary goods, and $U(X_1, ...
Anishka Mishra's user avatar
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1 answer
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Measuring and assigning utility numbers

I was recently introduced to the concept of cardinal utility. In real life, how do we assign these utility levels? For example if i wanted to assign numbers to my own utility indifference curve for ...
Polario's user avatar
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Is it accurate to state that an economist cannot assign a true numerical value for utility?

Investopedia article - What is the utility function and how is it calculated? https://www.investopedia.com/ask/answers/072915/what-utility-function-and-how-it-calculated.asp Article describes ordinal ...
SystemTheory's user avatar
2 votes
2 answers
126 views

Is it considered acceptable or unacceptable to use currency as a measure of utility?

There will always exist at least one economist who condones measuring utility in US dollars and another who does not. However, I am wondering which way the majority of contemporary economists lean. ...
Toothpick Anemone's user avatar
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2 answers
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Fair value that a risk averse individual would pay to enter a gamble

Introduction Assuming an individual (or corporation) with risk aversion and a von Neumann-Morgenstern utility curve and given a gamble g with E(g) > 0. From what I researched, certainty equivalent is ...
rmorel's user avatar
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1 answer
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Relationship between expected utility and independence axiom

Jonathan Levin in "Choice under Uncertainty" wrote in Theorem 1 " A complete and transitive preference relation on a set of lotteries P satisfies continuity and independence if and only if it admits ...
Frodo Baggins's user avatar
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1 answer
265 views

finding optimal values of quantities through utility function when MRS is 1 and price ratio is 1:2 [closed]

so this is a somewhat simple question but im stumped, here's why: given the utility U=2$X_1$+2$X_2$ where $P_1$$X_1$+$P_2$$X_2$=20 and $P_1$=0.5$P_2$ the question asks to find optimal values of $...
Swaleh Arif's user avatar
4 votes
2 answers
1k views

What are the units of utility?

I'm trying to show a result that involves utility and money (the latter is in dollars). I would like to know if it is safe to assume that the units of utility is dollars? After all, in auction ...
Joebevo's user avatar
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4 votes
2 answers
2k views

Purpose of a monotonic transformations in utility functions

Based on my economics book, monotonic transformations for a utility function can look something like this: $f(u) = u + 17 $ or even like this: $f(u) = u^3$ That being said what it purpose in the ...
Fozoro's user avatar
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1 vote
1 answer
394 views

What is the concept of ordinal utility?

I have read in many books that since utility cannot be measured - so ordinal concept or comparison concept is used. If that is so, how can one define a mathematical function for utility which gives a ...
DrStrangeLove's user avatar
2 votes
1 answer
135 views

Anscombe and Auman Expected Utility

I would like to hopefully get some insights on the Anscombe and Aumann Expected utility. I've read some proofs and understood the Expected Utility Theorem (VNM) which allows us to approach consumers ...
Rororo's user avatar
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1 answer
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Do we really need accurate utility functions?

Knowing that a utility function's primary purpose it to be used as a tool to rank consumption bundles, I was wondering: "do we really need to be concerned with accurate identification utility ...
EconJohn's user avatar
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1 vote
1 answer
339 views

Why are there infinitely many indifference curves?

If an indifference curve shows quantities where a consumer's utility from consuming two goods are equal, then why are there infinitely many indifference curves? From the diagram, you can have Q1,Q2 on ...
tsp216's user avatar
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Indifference curve - Does $dU = 0$ hold in higher dimensions? / Problem of integrability

In two dimensions, we have on an indifference curve that $dU=0$. Does this apply to indifference objects in higher dimensions? I was thinking that if $dU > 0$, then one is moving to a higher ...
BCLC's user avatar
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Estimate the Utility function for the Principal-Agent problem (real case)

I have a company and I have to set the wage to my employer based on different levels of revenues. Examples W_1 if Revenue = 100k ...
sparkle's user avatar
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7 votes
1 answer
598 views

Selecting the best utility function for households

I have little to no background in micro, but I'm learning about utility functions. It seems that there are many forms of utility functions for households. In general terms, how does one go on to ...
StatsScared's user avatar
7 votes
1 answer
145 views

Mythbusters - Determine optimal boarding strategy based on time and satisfaction score

Most airlines board passengers starting from the back of the plane and then working their way towards the front (after boarding priority classes and passengers). In an episode of Mythbusters, Adam ...
BCLC's user avatar
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0 votes
1 answer
66 views

How to model best combination of resources

I don't have an economics background, I come from CS. I am sorry if this question seems weird. We want to model the combination of a set of resources to either answer the cost of the model, minimize ...
vz0's user avatar
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0 answers
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Is utility function used in customer data/profile analysis? What alternatives in practice?

Utility function is great theoretical concept but is it used in customer data analysis or in building customer profile (e.g. from Big data or cash register/checkout data, ecommerce history) or in ...
TomR's user avatar
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4 votes
1 answer
315 views

Equality of ordinal vs. cardinal utility under transformations - who made the distinction first?

In the context of preferences among items or choices under certainty, we can consider ordinal value function (viz., utility functions) to be equivalent under monotonously increasing transformations $u(...
Eric '3ToedSloth''s user avatar
1 vote
1 answer
315 views

Measuring "Intangible Utility" (reference request/methodological discussion)

I was just listening to some music and I found myself thinking about how I might measure the utility I experience from listening to it. I know there has been a lot of work done with measuring utility ...
DornerA's user avatar
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