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Utility functions as ordinarily used are not a measure of well-being comparable among people, but a representation of preferences. Moreover, preferences could principally be elicited from choice experiments. A utility function assigns real numbers to alternatives so that one alternative is preferred to the other if and only if it is assigned a higher number. ...


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Yes. In general not. Let's say the individual has initial wealth $W$ and the gamble $g$ has payouts $0$ and $G$, each with probability $1/2$. As you say, the certainty equivalent $C$ of the gamble is the amount $C$ with $$u(W+C)=(u(W)+u(W+G))/2.$$ Now the same individual would be willing to pay at most $P$ to enter the gamble, where $$u(W)=(u(W-P)+u(W+G-P))/...


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If you assume that agents' utility functions over pairs $(x,t)$ of consumption bundles $x$ and monetary transfers $t$ are quasilinear in money, $u_i(x,t)=v_i(x)+t$, then $v_i(x)$ measures $i$'s WTP for $x$. In a utilitarian framework the sum of utilities is then a social welfare function satisfying Arrow's axioms (apart from universal domain of course) and ...


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If the preferences do not have an expected utility representation, then either the preferences are not continuous, or they do not satisfy the axiom of independence. For example in prospect theory, consumers display loss aversion, which means that their preferences are not linear in probabilities. This is a case where preferences do not have the expected ...


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