# Questions tagged [measuring-utility]

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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 ...
1 vote
35 views

### 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/...
63 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 ...
62 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 ...
100 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 ...
213 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 ...
54 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 ...
144 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?
333 views

763 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 ...
731 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
347 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 ...
102 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
100 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
292 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 ...
137 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
205 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 ...
549 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 ...
134 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 ...
64 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 ...
87 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 ...