Questions tagged [measuring-utility]
The measuring-utility tag has no usage guidance.
27
questions
-1
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1answer
59 views
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 ...
2
votes
1answer
55 views
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
...
3
votes
1answer
91 views
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 ...
2
votes
2answers
115 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 ...
2
votes
0answers
37 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 ...
-2
votes
1answer
82 views
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?
2
votes
2answers
240 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 $U(X_1, ...
2
votes
1answer
47 views
Measuring and assigning utility numbers
I was recently introduced to the concept of cardinal utility. In real life, how do we assign these utility levels? For example if i wanted to assign numbers to my own utility indifference curve for ...
0
votes
1answer
202 views
Is it accurate to state that an economist cannot assign a true numerical value for utility?
Investopedia article - What is the utility function and how is it calculated?
https://www.investopedia.com/ask/answers/072915/what-utility-function-and-how-it-calculated.asp
Article describes ordinal ...
2
votes
2answers
78 views
Is it considered acceptable or unacceptable to use currency as a measure of utility?
There will always exist at least one economist who condones measuring utility in US dollars and another who does not. However, I am wondering which way the majority of contemporary economists lean.
...
0
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2answers
83 views
Fair value that a risk averse individual would pay to enter a gamble
Introduction
Assuming an individual (or corporation) with risk aversion and a von Neumann-Morgenstern utility curve and given a gamble g with E(g) > 0.
From what I researched, certainty equivalent is ...
0
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1answer
104 views
Relationship between expected utility and independence axiom
Jonathan Levin in "Choice under Uncertainty" wrote in Theorem 1 " A complete and transitive preference relation on a set of lotteries P satisfies continuity and independence if and only if it admits ...
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votes
1answer
109 views
finding optimal values of quantities through utility function when MRS is 1 and price ratio is 1:2 [closed]
so this is a somewhat simple question but im stumped, here's why:
given the utility U=2$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 $...
4
votes
2answers
661 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 ...
4
votes
2answers
527 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 ...
1
vote
1answer
336 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 ...
2
votes
1answer
101 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 ...
1
vote
1answer
98 views
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 ...
1
vote
1answer
281 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 ...
5
votes
1answer
130 views
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 ...
1
vote
0answers
184 views
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
...
7
votes
1answer
523 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 ...
7
votes
1answer
132 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 ...
0
votes
1answer
60 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 ...
0
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0answers
85 views
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 ...
4
votes
1answer
250 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(...
1
vote
1answer
298 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 ...
