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Multiattribute Risk Linearity

Author

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  • Charles M. Harvey

    (Department of Decision and Information Sciences, University of Houston, Houston, Texas 77204-6282)

Abstract

In applying multiattribute utility theory, one typically assumes the condition of mutual utility independence and uses a multiattribute utility function that is additive or multiplicative. This paper proposes a model in which this condition is not satisfied, that is, the risk attitude for one attribute depends on the amounts of the other attributes. We introduce a condition on this dependence called "multiattribute risk linearity" that implies a logarithmic form for the multiattribute utility function, and we show that a logarithmic utility function can be determined by assessment procedures that require the same number of indifference assessments as those for a multiplicative utility function.

Suggested Citation

  • Charles M. Harvey, 1993. "Multiattribute Risk Linearity," Management Science, INFORMS, vol. 39(3), pages 389-394, March.
    • Handle: RePEc:inm:ormnsc:v:39:y:1993:i:3:p:389-394
    DOI: 10.1287/mnsc.39.3.389
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    Cited by:

    1. Bruce Niendorf & Thomas Ottaway, 2002. "Wealth effects of time variation in investor risk preferences," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 26(1), pages 77-87, March.
    2. Ali E. Abbas & Ronald A. Howard, 2005. "Attribute Dominance Utility," Decision Analysis, INFORMS, vol. 2(4), pages 185-206, December.
    3. Abdildin, Yerkin G. & Abbas, Ali E., 2016. "Analysis of decision alternatives of the deep borehole filter restoration problem," Energy, Elsevier, vol. 114(C), pages 1306-1321.

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