Questions tagged [utility]

Utility, or usefulness, is the (perceived) ability of something to satisfy needs or wants.

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How does advertising improve the utility of a product?

In this research paper titled: Advertising Spillovers: Field-Experiment Evidence and Implications for Returns from Advertising, I come across the following ...
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Limits of utilitarianism?

In all of economics that I know, people maximize their Utility $U_i=f(x_1,...,x_n)$, and therefore make some kind of cost-benefit analysis. One obvious criticism to this model is that we often do not ...
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Creating utility function with certain properties

This is a fun little task I need help completing. Im creating a game-theoretical model for the utility a government get from labour rights (R) and FDI (F), and I need a utility function to have ...
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487 views

Utility function of a representative agent with quasilinear utility

Consider an economy with $n$ consumers with an identical utility function, which is quasilinear in $x$: $$ u_i(x,y) = x+u(y) $$ If we want to represent all consumers by a single representative ...
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References for "Capturing value"

I have seen in several places references to "capturing value". For example: Value Creation vs. Value Capture Work on Stuff that Matters: First Principles I think that such considerations are ...
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Von Neuman-Morgenstern utility theorem apply only to linear utility functions?

Does the Von Neuman-Morgenstern utility theorem apply only to linear utility functions? If yes, what extension of this theorem of which theorem needs to be applied to use more specific utility ...
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Utility function parameters

I have the following utility function: u($x_1$,$x_2$)=($x_1$+$b_1$)$^c$($x_2$+$b_2$)$^{1-c}$ I'm asked to explain what $b_1$, $b_2$ and $c$ stand for, maybe for c is like a weight of every good. but I'...
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How to derive the Indirect Utility Function and Marshallian Demand from Homothetic Preferences

I need to prove the following relationships: 1 - If preferences are homothetic, then the indirect utility function can be written as $v(p, w) = v(p) · w$. 2 - If preferences are homothetic, then the ...
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What is the usefulness of Cobb Douglas functions? Why do we use them so often?

Hard to find much explanation as to why we generally use CD functions so often. My understanding is that it is usually well behaved when used for utility functions and preferances, since it is convex,...
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Labor Supply- how to do comparative statics?

Consider an economy with a competitive industry where the representative firm's production function takes the form of a Cobb Douglas production function $Y=z K^{\theta} L^{1-\theta}$. $z$ is an index ...
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Marginal utility and convex utility function

If we have a convex utility function, like the quadratic one, does the law of diminishing amrgnial utility still apply or do we have that the partial derivative of utility with respect to, say ...
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Name of this $u\left(x_{1}, x_{2}\right)=x_{1}+\alpha x_{2}+\beta \sqrt{x_{1} x_{2}}$ utility function?

I have seen this $u\left(x_{1}, x_{2}\right)=x_{1}+\alpha x_{2}+\beta \sqrt{x_{1} x_{2}}$ a numbers of time now. I wonder whether it is somehow special and therefore has it's own name? Kind regards,
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How to prove monotonic transformation of the function and equivalence?

At the microeconomics course I have to prove monotonic transformation of the function U(x,y) = A(x^a)(y^b) into U(x,y) = (x^0.5)(y^0.5) Since the MRS are ay/bx and x/y resp. I can obviously only ...
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How to prove that the walrasian demand function $x(p,w)$ is continuous in $p$ and $w$?

If the utility function $u$ is continuous and satisfies local nonsatiation, and walrasian demand function $x(p, w)$ is a function (i.e. always map to only single values), how to prove that $x(p,w)$ is ...
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Is this utility function continuous?

$u(x_1,x_2)=|x_1 −2|+x_2$ Is this function continuous? PS: The continuity theorem I use is this: Whenever for any $x^n$, $n \in N$ with $x^n \to x$ (i.e. $\lim_{n \to \infty} x^n = x$) and for any $...
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Are marginal utilities or utilities compared?

Consider decision making in an economic model. Suppose that there is some utility and it is a function of consumption and leisure where leisure is full-time work, part-time work, or full-time ...
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312 views

Question about an economy with 3 components household, firm and government with functions given

I've spent considerable amount of time on this question, in vain. It is from one of the competitive exams for admission to a grad econ program. Help would be tremendously appreciated. Thanks. An ...
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Is there a possibility to have an inferior good (x) in a utility function where x & y have 0 cross elasticity?

A question I got on an exam that I think I messed up on: If we have cross elasticity of 0 (x & y are independent), can x be an inferior good? I answered with a yes. Am I wrong?
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Does Preference have a Hierarchy? A Silly Question

I have what is probably a very silly question, but I have gone down the rabbit hole and can’t get back out..... Is there is a hierarchy of preference, and within each level of choice do we reset the ...
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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 ...
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How does supply and demand determine price for the following scenario?

Two individuals are stranded on an island. Bob and Jill. By themselves they can produce: Bob: 5 fish & 5 coconuts Jill: 5 fish & 5 coconuts If they specialize and trade, they can produce: ...
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535 views

Interpreting coefficient in the disutility function as disutility tolerance?

I am studying a model that relates incentives (money) and a set of actions. Let $f(x) = k\frac{x^2}{2}$ be the disutility function of the agent, where $x$ is the level of effort that the agent is ...
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max{x1,x2} where P1not=p2

I have seen min{x1,x2} functions representing perfect compliments but have never seen a max{x1,x2} function anywhere in my book or lectures, I also have never seen anything about p1 not equaling p2. ...
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Strictly increasing function transformation

I have utility function given by: $U(x_1, x_2) = \begin{cases} x_1+x_2 & \text{if $x_1+x_2<6$} \\ 6 & \text{if $6\...

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