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State of the Art---Utility Assessment Methods

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  • Peter H. Farquhar

    (Graduate School of Industrial Administration, Carnegie-Mellon University, Pittsburgh, Pennsylvania 15213)

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    Abstract

    This paper is a comprehensive study of methods for assessing unidimensional expected utility functions. The paper describes the utility assessment process in decision analysis and then reviews problem formulation, sources of bias in preference judgments, and the analysis of risk attitudes. Two dozen utility assessment methods of which half appear for the first time are critically examined. These methods are grouped into preference comparison methods, probability equivalence methods, value equivalence methods, certainty equivalence methods, hybrid methods, paired-gamble methods, and other approaches. The paper emphasizes the nature of judgmental biases in comparing different assessment procedures. Since most multiattribute utility functions are decomposed into single-attribute functions, this study should facilitate such applications. The paper concludes with several directions for further developmental, empirical, and applied research.

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    File URL: http://dx.doi.org/10.1287/mnsc.30.11.1283
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 30 (1984)
    Issue (Month): 11 (November)
    Pages: 1283-1300

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    Handle: RePEc:inm:ormnsc:v:30:y:1984:i:11:p:1283-1300

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    Related research

    Keywords: utility; preference; estimation; decision analysis;

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    Cited by:
    1. Abdellaoui, Mohammed & Bleichrodt, Han, 2007. "Eliciting Gul's theory of disappointment aversion by the tradeoff method," Journal of Economic Psychology, Elsevier, vol. 28(6), pages 631-645, December.
    2. Schunk, Daniel & Betsch, Cornelia, 2006. "Explaining heterogeneity in utility functions by individual differences in decision modes," Journal of Economic Psychology, Elsevier, vol. 27(3), pages 386-401, June.
    3. Warneryd, Karl-Erik, 1996. "Risk attitudes and risky behavior," Journal of Economic Psychology, Elsevier, vol. 17(6), pages 749-770, December.
    4. Claude Le Pen, 1997. "Théorie de l'utilité et mesure des états de santé, le débat QALYs-HYEs," Économie et Prévision, Programme National Persée, vol. 129(3), pages 37-54.
    5. Ringuest, Jeffrey L. & Graves, Samuel B., 2000. "A sampling-based method for generating nondominated solutions in stochastic MOMP problems," European Journal of Operational Research, Elsevier, vol. 126(3), pages 651-661, November.
    6. Morrison, Gwendolyn C., 1997. "HYE and TTO: What is the difference?," Journal of Health Economics, Elsevier, vol. 16(5), pages 563-578, October.
    7. Shackley, Phil & Cairns, John, 1996. "Evaluating the benefits of antenatal screening: an alternative approach," Health Policy, Elsevier, vol. 36(2), pages 103-115, May.
    8. Stanciulescu, C. & Fortemps, Ph. & Installe, M. & Wertz, V., 2003. "Multiobjective fuzzy linear programming problems with fuzzy decision variables," European Journal of Operational Research, Elsevier, vol. 149(3), pages 654-675, September.
    9. Mehrez, Abraham, 1997. "The interface between OR/MS and decision theory," European Journal of Operational Research, Elsevier, vol. 99(1), pages 38-47, May.
    10. Krahnen, Jan Pieter & Rieck, Christian & Theissen, Erik, 1997. "Inferring risk attitudes from certainty equivalents: Some lessons from an experimental study," Journal of Economic Psychology, Elsevier, vol. 18(5), pages 469-486, September.

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