The Domain and Interpretation of Utility Functions: An Exploration
AbstractThis paper proposes an exploration of the methodology of utility functions that distinguishes interpretation from representation. While representation univocally assigns numbers to the entities of the domain of utility functions, interpretation relates these entities with empirically observable objects of choice. This allows us to make explicit the standard interpretation of utility functions which assumes that two objects have the same utility if and only if the individual is indifferent among them. We explore the underlying assumptions of such an hypothesis and propose a non-standard interpretation according to which objects of choice have a well-defined utility although individuals may vary in the way they treat these objects in a specific context. We provide examples of such a methodological approach that may explain some reversal of preferences and suggest possible mathematical formulations for further research. Copyright Kluwer Academic Publishers 2001
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Bibliographic InfoArticle provided by Springer in its journal Theory and Decision.
Volume (Year): 51 (2001)
Issue (Month): 2 (December)
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Web page: http://www.springerlink.com/link.asp?id=100341
Utility; representation; interpretation; preference reversal;
Other versions of this item:
- Marc Le Menestrel & Luk N. Van Wassenhove, 2001. "The domain and interpretation of utility functions: An exploration," Economics Working Papers 576, Department of Economics and Business, Universitat Pompeu Fabra.
- A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
- D00 - Microeconomics - - General - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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