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Multiattribute Utility Theory Without Expected Utility Foundations

Author

Listed:
  • John M. Miyamoto

    (University of Washington, Seattle, Washington)

  • Peter Wakker

    (University of Leiden, Leiden, The Netherlands)

Abstract

Methods for determining the form of utilities are needed for the implementation of utility theory in specific decisions. An important step forward was achieved when utility theorists characterized useful parametric families of utilities and simplifying decompositions of multiattribute utilities. The standard development of these results is based on expected utility theory which is now known to be descriptively invalid. The empirical violations of expected utility impair the credibility of utility assessments. This paper shows, however, that parametric and multiattribute utility results are robust against the major violations of expected utility. They retain their validity under nonexpected utility theories that have been developed to account for actual choice behavior. To be precise, characterizations of parametric and multiattribute representations are extended to rank-dependent utility, state-dependent utility, Choquet-expected utility, and prospect theory.

Suggested Citation

  • John M. Miyamoto & Peter Wakker, 1996. "Multiattribute Utility Theory Without Expected Utility Foundations," Operations Research, INFORMS, vol. 44(2), pages 313-326, April.
    • Handle: RePEc:inm:oropre:v:44:y:1996:i:2:p:313-326
    DOI: 10.1287/opre.44.2.313
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    Citations

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    Cited by:

    1. Gebhard Geiger, 2012. "Multi-attribute non-expected utility," Annals of Operations Research, Springer, vol. 196(1), pages 263-292, July.
    2. Dogucan Mazicioglu & Jason R. W. Merrick, 2018. "Behavioral Modeling of Adversaries with Multiple Objectives in Counterterrorism," Risk Analysis, John Wiley & Sons, vol. 38(5), pages 962-977, May.
    3. Horst Zank, 2001. "Cumulative Prospect Theory for Parametric and Multiattribute Utilities," Mathematics of Operations Research, INFORMS, vol. 26(1), pages 67-81, February.
    4. Matthew Sobel, 2013. "Discounting axioms imply risk neutrality," Annals of Operations Research, Springer, vol. 208(1), pages 417-432, September.
    5. Bleichrodt, Han & Filko, Martin, 2008. "New tests of QALYs when health varies over time," Journal of Health Economics, Elsevier, vol. 27(5), pages 1237-1249, September.
    6. Angilella, Silvia & Greco, Salvatore & Lamantia, Fabio & Matarazzo, Benedetto, 2004. "Assessing non-additive utility for multicriteria decision aid," European Journal of Operational Research, Elsevier, vol. 158(3), pages 734-744, November.
    7. Zank H., 1998. "Cumulative Prospect Theory for Parametric and Multiattribute Utilities," Research Memorandum 008, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    8. Safra, Zvi & Segal, Uzi, 1998. "Constant Risk Aversion," Journal of Economic Theory, Elsevier, vol. 83(1), pages 19-42, November.
    9. William B. Haskell & Wenjie Huang & Huifu Xu, 2018. "Preference Elicitation and Robust Optimization with Multi-Attribute Quasi-Concave Choice Functions," Papers 1805.06632, arXiv.org.
    10. Bertrand Munier, 2001. "Risk Attitudes Appraisal and Cognitive Coordination in Decentralized Decision Systems," Group Decision and Negotiation, Springer, vol. 10(2), pages 141-158, March.
    11. Anne Spencer & Angela Robinson, 2007. "Tests of Utility Independence When Health Varies over Time," Working Papers 596, Queen Mary University of London, School of Economics and Finance.
    12. Han Bleichrodt & John Miyamoto, 2003. "A Characterization of Quality-Adjusted Life-Years Under Cumulative Prospect Theory," Mathematics of Operations Research, INFORMS, vol. 28(1), pages 181-193, February.
    13. Han Bleichrodt & José-Luis Pinto-Prades, 2004. "The Validity of QALYs Under Non-Expected Utility," Working Papers 113, Barcelona School of Economics.
    14. Durbach, Ian N. & Stewart, Theodor J., 2012. "Modeling uncertainty in multi-criteria decision analysis," European Journal of Operational Research, Elsevier, vol. 223(1), pages 1-14.
    15. Zank, H., 1998. "Cumulative prospect theory for parametric and multiattribute utilities," Research Memorandum 019, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    16. Han Bleichrodt & Ulrich Schmidt & Horst Zank, 2009. "Additive Utility in Prospect Theory," Management Science, INFORMS, vol. 55(5), pages 863-873, May.
    17. George Wu, 1999. "Anxiety and Decision Making with Delayed Resolution of Uncertainty," Theory and Decision, Springer, vol. 46(2), pages 159-199, April.
    18. Charlene C Wu & Peter Bossaerts & Brian Knutson, 2011. "The Affective Impact of Financial Skewness on Neural Activity and Choice," PLOS ONE, Public Library of Science, vol. 6(2), pages 1-7, February.
    19. Peter P. Wakker & Horst Zank, 1999. "State Dependent Expected Utility for Savage's State Space," Mathematics of Operations Research, INFORMS, vol. 24(1), pages 8-34, February.
    20. Wakker, Peter P. & Zank, Horst, 2002. "A simple preference foundation of cumulative prospect theory with power utility," European Economic Review, Elsevier, vol. 46(7), pages 1253-1271, July.
    21. Bleichrodt, Han & Quiggin, John, 1999. "Life-cycle preferences over consumption and health: when is cost-effectiveness analysis equivalent to cost-benefit analysis?," Journal of Health Economics, Elsevier, vol. 18(6), pages 681-708, December.
    22. Anne Spencer & Angelo Ranaldo, 2007. "Tests of Utility Independence When Health Varies over Time," Working Papers 596, Queen Mary University of London, School of Economics and Finance.

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