A Study on Decision Making by Estimating Preferences Using Utility Function and Indifference Curve

2020 ◽  
pp. 373-386
Author(s):  
Suprava Devi ◽  
Mitali Madhusmita Nayak ◽  
Srikanta Patnaik
Keyword(s):  
Decision Making ◽  
Utility Function ◽  
Indifference Curve

The value of sociality

foresight ◽  
2014 ◽  
Vol 16 (4) ◽  
pp. 309-328 ◽  
Author(s):  
Evgeniya Lukinova ◽  
Mikhail Myagkov ◽  
Pavel Shishkin
Keyword(s):  
Decision Making ◽  
Utility Function ◽  
Social Relationship ◽  
Social Utility ◽  
Content Type ◽  
Individual Level ◽  
Know How ◽  
General Utility ◽  
The Social ◽  
Individual Decisions

Purpose – This paper aims to study the value of sociality. Recent experimental evidence has brought to light that the assumptions of the Prospect Theory by Kahneman and Tversky do not hold in the proposed substantive domain of “sociality”. In particular, the desire to be a part of the social environment, i.e. the environment where individuals make decisions among their peers, is not contingent on the framing. Evolutionary psychologists suggest that humans are “social animals” for adaptive reasons. However, entering a social relationship is inherently risky. Therefore, it is extremely important to know how much people value “sociality”, when the social outcomes are valued more than material outcomes and what kinds of adaptations people use. Design/methodology/approach – We develop a new theory and propose the general utility function that features “sociality” component. We test the theory in the laboratory experiments carried out in several countries. Findings – Our results suggest that when stakes are low the theory of “sociality” is successful in predicting individual decisions: on average, people do value “sociality” and it surpasses the monetary loss. Originality/value – The main contribution of this paper is the breakdown of the risk attitudes under low stakes and individual level of decision-making. Another advancement is the ability to formalize the social utility or the theory of “sociality” in an economic model; we use general utility function that we define both on the outcomes and on the process of the decision-making itself and test in laboratory studies.

scholarly journals Intrahousehold Decision Making and Fertility

2017 ◽  
Author(s):  
Matthias Doepke ◽  
Fabian Kindermann
Keyword(s):  
Decision Making ◽  
Utility Function ◽  
Empirical Evidence ◽  
Important Determinant ◽  
Household Formation ◽  
Joint Decision ◽  
Considerable Heterogeneity ◽  
Unitary Model ◽  
Fertility Choices ◽  
Intrahousehold Decision Making

This chapter analyzes the implications of modeling fertility choices as outcomes of intrahousehold conflict and bargaining. It argues for a reformulation of fertility theories that are embedded in more realistic theories of household formation and joint decision making within the household. Empirical evidence suggests that disagreement regarding fertility choices is commonplace. In addition to a level difference in the desired fertility of women and men, there is evidence of considerable heterogeneity across households. The data on fertility preferences suggests at least the possibility that within-household disagreement on fertility is an important determinant of fertility outcomes. The chapter also shows how the vast majority of economic models of fertility have been based on a unitary model of the household, where the household is conceived as a single entity with a single utility function.

Preferences, Utility, and Stochastic Approximation

2018 ◽  
pp. 2188-2199
Author(s):  
Yuri P. Pavlov ◽  
Rumen D. Andreev
Keyword(s):  
Complex System ◽  
Decision Making ◽  
Utility Function ◽  
Stochastic Approximation ◽  
Mathematical Description ◽  
Innovative Approach ◽  
Precise Information ◽  
A Value ◽  
Active Assistance

A complex system with human participation like “human-process” is characterized with active assistance of the human in the determination of its objective and in decision-taking during its development. The construction of a mathematically grounded model of such a system is faced with the problem of shortage of mathematical precise information that presents the human activity. A solution of this problem is to seek expression of different aspects of the complex system through description of the expert's preferences as an element of the system. The presentation of human preferences analytically with utility functions is an approach for their mathematical description. The objective of the article is to present an innovative approach to value driven modeling of management that bases on preference-oriented decision making. It is described a decision technology that realizes measurement of human's preferences as analytic utility function. The utility theory and stochastic approximation are possible solution of this problem that results in a value-based approach to modeling of complex systems.

Supply Chain Contracting with Linear Utility Function

2017 ◽  
Vol 10 (2) ◽  
pp. 1-20 ◽  
Author(s):  
Ningning Wang ◽  
Jibao Gu ◽  
Qinglong Gou ◽  
Jinfeng Yue
Keyword(s):  
Decision Making ◽  
Supply Chain ◽  
Utility Function ◽  
Wholesale Price ◽  
Profit Maximization ◽  
Newsvendor Model ◽  
Supply Chain Contracting ◽  
Linear Utility ◽  
Linear Utility Function ◽  
Linear Setting

The supply chain contracting has traditionally been based on the profit maximization assumption. Recent research has shown that some behavior factors may influence the decision making of supply chain members. The authors utilize a linear utility function to depict such behavior factors and incorporate these into the newsvendor model. The linear utility function provides sufficient flexibility to better capture people's various behavior factors. By supposing the agents are concerned with behavior factors, the authors first investigate how the factors affect the supply chain under wholesale price contract, and find that they do not influence coordination condition, but can adjust the distribution of profits. Then they extend their study to other four common contracts with a similar method and systematically demonstrate that the behavior of agents in such a linear setting has no effect on the conditions of coordinating supply chain.

scholarly journals Orthogonal strategy based computer-mediated negotiation: Principles and example

2018 ◽  
Vol 46 (6) ◽  
pp. 1036-1060
Author(s):  
Cahyono Susetyo ◽  
Harry Timmermans ◽  
Bauke de Vries
Keyword(s):  
Decision Making ◽  
Computer System ◽  
Indifference Curve ◽  
Decision Makers ◽  
Second Phase ◽  
Face Negotiation ◽  
Computer Mediated ◽  
Decision Making Processes ◽  
Multi Stakeholder ◽  
Optimum Solution

Previous efforts to improve stakeholders’ involvement in planning and decision-making processes mostly put planners and decision makers as the ones who decide which solution is the best for the decision problems. In bottom-up planning and decision-making processes that supposedly involve stakeholders as much as possible, the most common practice is that when stakeholders have different preferences about the decision issues, supra decision makers such as planners and experts gather stakeholders’ preferences, and then, using their expertise and experience, decide what is the best choice for stakeholders. We approach the involvement of stakeholders in planning and decision-making not by relying on planners’ expertise but from a negotiation perspective. Previous works related to stakeholders’ negotiation mostly require stakeholders to engage in a face-to-face negotiation that seldom involves a computer system to improve the process. In this paper, we develop a negotiation system to support multi-issue and multi-stakeholder decision-making problems. In our approach, stakeholders do not directly interact with each other. Their proposals are submitted to a system that produces counter-proposals to reduce the differences among stakeholders’ proposals. Therefore, stakeholders do not exchange their preferences directly, but rather preference elicitations are mediated by the system. This approach is called computer-mediated negotiation. The system itself is based on the principle of an orthogonal strategy. Our computer-mediated negotiation protocol consists of two main phases. The first phase is the preference elicitation phase, which measures stakeholders’ utility functions. The second phase is the e-negotiation phase, in which stakeholders make their proposals and the computer system provides suggestions to improve them. To simulate real-world negotiations where stakeholders make proposals and counter-proposals in a series of negotiation rounds, we implemented the indifference curve approach to enable stakeholders to make incremental changes of their proposals during negotiation. The results from our experiment suggest that our method can produce an optimum solution for a multi-issue and multi-stakeholder decision problem by moving stakeholders’ proposals closer to one another.

Command Decisions

2010 ◽  
Vol 34 (4) ◽  
pp. 499-522
Author(s):  
Scott Martin
Keyword(s):  
Decision Making ◽  
Utility Function ◽  
Indigenous Peoples ◽  
Expected Utility ◽  
Interdisciplinary Approach ◽  
Socioeconomic Class ◽  
The Relationship ◽  
Insight Into ◽  
Conquest Of Mexico

The interaction of Spanish and indigenous peoples during the conquest of Mexico yielded a wide variety of actions and decisions. Native groups sometimes battled the Spanish but in other instances cooperated. The Spaniards often attacked when facing overwhelming odds but in other situations retreated with meager gains. Insight into those decisions and actions is gained by looking at human wants and preferences. The Friedman-Savage utility function is applied to specific important events of the conquest of Mexico to clarify the decision making of the participants. An interdisciplinary approach is employed in constructing the expected utility of wealth model, where the maximization of the expected utility of wealth and movement between socioeconomic classes is critically analyzed. Evidence from the Juan de Grijalva expedition, interactions with coastal villages, Hernán Cortés's approach to Tenochtitlan, and the Tlaxcalan decision to ally with the Spaniards are used to clearly illustrate the relationship between the utility of wealth and decision making. Looking through the lens of the Friedman-Savage utility function at events up to Cortés's meeting with Moteucçoma, it is clear that the utility of wealth and the unprecedented opportunities to move to a new socioeconomic class were strong factors in the decision making of the participants.

Consumer Utility Function: Initial Findings Through Lagrange Optimization Method

2012 ◽  
Vol 1 (1) ◽  
Author(s):  
Ferdinand C. Paurom
Keyword(s):  
Utility Function ◽  
Rational Choice ◽  
Consumer Choice ◽  
Indifference Curve ◽  
Optimization Method ◽  
Negative Slope ◽  
United States Department ◽  
Department Of Agriculture ◽  
The Us ◽  
Pork Consumption

The main problem in utility theory or its variant theory of consumer choice is that consumer is assumed capable of rational choice; yet, such choice is incapable of translating itself into rational numbers. On this account the assumption of rational choice remains dubious. This paper utilized Lagrange optimization method to approximate consumer utility function measured in cardinal units. The utility function was derived from the US deflated annual per capita consumption of pork and beef (United States department of Agriculture, USDA, 1998). This paper demonstrates that when quantities of pork are consumed, given the price, in effect gives diminishing marginal levels of pork consumption in opposite monotonic direction with beef consumption. Changes in the level of consumption approximate cardinally the consumer utility function consistent with the properties of indifference curve and with the axioms of consumer rational choice. This paper has two objectives: 1) to provide further insights on the measurability of consumer utility, and 2) to provide basis for forecasting the demand for pork and beef. This paper concluded that Pork-beef substitution of US consumers is an exponential function which exhibits pattern of the textbook-defined indifference curve and has the features of negative slope, convexity and asymptote. The function is also consistent with the axioms of consumer rational choice.   Keywords - consumer utility function, lagrange optimization method

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