A class of multiattribute utility functions |
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Authors: | András Prékopa Gergely Mádi-Nagy |
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Institution: | (1) RUTCOR, Rutgers Center for Operations Research, Rutgers University, 640 Bartholomew Road, Piscataway, NJ 08854-8003, USA;(2) Mathematical Institute, Budapest University of Technology and Economics, Műegyetem rakpart 1-3., 1111 Budapest, Hungary |
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Abstract: | A function u(z) is a utility function if u′(z) > 0. It is called risk averse if we also have u′′(z) < 0. Some authors, however, require that u
(i)(z) > 0 if i is odd and u
(i)(z) < 0 if i is even. The notion of a multiattribute utility function can be defined by requiring that it is increasing in each variable
and concave as an s-variate function. A stronger condition, similar to the one in case of a univariate utility function, requires that, in addition,
all partial derivatives of total order m should be positive if m is odd and negative if m is even. In this paper, we present a class of functions in analytic form such that each of them satisfies this stronger condition.
We also give sharp lower and upper bounds for Eu(X
1,... , X
s
)] under moment information with respect to the joint probability distribution of the random variables X
1,... , X
s
assumed to be discrete and representing wealths.
Partially supported by OTKA grants F-046309 and T-047340 in Hungary. |
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Keywords: | Multiattribute utility function Mixed utility function Expected utility |
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