Decision-Maker Utility Function
(Redirected from Preference (Economics))
A Decision-Maker Utility Function is a decision-making utility function of a decision-maker.
- AKA: Agent-Centric Objective, Subjective Preference.
- Context:
- It can (typically) be used in a Decision Making Act.
- It can (typically) be an Agent Preference.
- It can range from being a Strict Preference Function to being a Weak Preference Function.
- It can be based on a Cost Function and a Benefit Function.
- …
- Example(s):
- Counter-Example(s):
- See: Reward, Utilitarianism, Cardinal Utility, Public Interest, Private Interest, Pareto Efficiency.
References
2013
- http://plato.stanford.edu/entries/game-theory/#Util
- QUOTE: … An economic agent is, by definition, an entity with preferences. Game theorists, like economists and philosophers studying rational decision-making, describe these by means of an abstract concept called utility. This refers to some ranking, on some specified scale, of the subjective welfare or change in subjective welfare that an agent derives from an object or an event. By ‘welfare’ we refer to some normative index of relative well-being, justified by reference to some background framework. For example, we might evaluate the relative welfare of countries (which we might model as agents for some purposes) by reference to their per capita incomes, and we might evaluate the relative welfare of an animal, in the context of predicting and explaining its behavioral dispositions, by reference to its expected evolutionary fitness. In the case of people, it is most typical in economics and applications of game theory to evaluate their relative welfare by reference to their own implicit or explicit judgments of it. This is why we referred above to subjective welfare. …
… Since game theory involves formal reasoning, we must have a device for thinking of utility maximization in mathematical terms. Such a device is called a utility function. The utility-map for an agent is called a ‘function’ because it maps ordered preferences onto the real numbers.
- QUOTE: … An economic agent is, by definition, an entity with preferences. Game theorists, like economists and philosophers studying rational decision-making, describe these by means of an abstract concept called utility. This refers to some ranking, on some specified scale, of the subjective welfare or change in subjective welfare that an agent derives from an object or an event. By ‘welfare’ we refer to some normative index of relative well-being, justified by reference to some background framework. For example, we might evaluate the relative welfare of countries (which we might model as agents for some purposes) by reference to their per capita incomes, and we might evaluate the relative welfare of an animal, in the context of predicting and explaining its behavioral dispositions, by reference to its expected evolutionary fitness. In the case of people, it is most typical in economics and applications of game theory to evaluate their relative welfare by reference to their own implicit or explicit judgments of it. This is why we referred above to subjective welfare. …
1964
- (Pratt et al., 1964) ⇒ John Pratt W. (1964). “Risk Aversion in the Small and in the Large." Econometrica: Journal of the Econometric Society
- QUOTE: … Consider a decision maker with assets x and utility function u. We shall be interested in the risk premium or such that he would be indifferent between receiving a risk z and receiving the non-random amount E(z) - 7r, that is, ir less than the actuarial value E(z). If u is concave …