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Results tagged with utility
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user 4447
Utility, or usefulness, is the (perceived) ability of something to satisfy needs or wants.
7
votes
2
answers
428
views
Why should the statistical value of life exist?
My question is not about why this concept is useful; I understand its utility. (No pun intended.) My question is, why should the statistical value of life exist at all? … That's because living and dying do not comport with von Neumann Morgenstern axioms; the average places the utility of survival at infinity, and yet they assign finite values to small risks of dying. …
7
votes
Accepted
Does risk aversion cause diminishing marginal utility, or vice versa?
So the answer to my question seems to be that diminishing marginal utility in the vNM utility function reflects genuine diminishing marginal utility when it comes to intensity of preferences, and thus … (assuming the vNM axioms are true) diminishing marginal utility really is the cause of risk aversion. …
7
votes
3
answers
2k
views
Question about the Ellsberg Paradox in Expected Utility Theory
The von Neumann-Morgenstern theorem states that, assuming a person's preferences under risk satisfy certain rationality axioms, then there exists a utility function u, the von Neumann utility function, … So my question is, does it violate expected utility theory to prefer both A' to B' and D' to C'? I think it's consistent with expected utility theory. …
11
votes
3
answers
1k
views
Does risk aversion cause diminishing marginal utility, or vice versa?
In other words, you maximize the expected value of the utility function. … If we express this notion in terms of the von Neumann-Morgenstern utility function, we get the following result through Jensen's inequality: a person is risk averse if and only if their utility function …