Talk:Utility
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[edit] Lower-case ‘U’ and ‘Υ’
u and υ are difficult to distinguish. - Patrick 09:39, 6 Sep 2003 (UTC)
[edit] Philosophical Utility
This article is too much focused on 20th century concepts of utility in economics. Utility in philosophy before and during that time perio* Risk - some investments may have an alluring average/classical utility, yet are too risky for some investors to realistically enter. For example, a given business venture has a 1 in 10 chance of multiplying the principle investment by 20, and a 9 in 10 chance of a zero return. The average/classical utility of this investment is a 2-fold return on investment. This sort of investment is prudent only if there are enough such opportunities for the statistical average to be attained with reasonable certainty. And the investor must have deep enough pockets to finance such an extensive venture. An investment company may have the resources to do so, but individual investors may not.
- Classical Utility - for example an investment has a 50% chance of doubling the principle and a 50% chance of halving the principle. The classical utility of this investment is the average of 2 and 1/2; that is 1.25. A buyer may purchase a more expensive good because it will need replacement at a later date. Classical utility isn't inherently statistical; a given tool may have a add 50% to the value of a raw material and its classical utility is a measure of such.
- preference - a buyer may choose to purchase the item with the lower classical utility, simply because the buyer prefers that item. Marketing is heavily focused on this aspect of commerce. A buyer may purchase goods from the outlet with a freindly staff and higher priced, lower quality inventory.
- indifference - the classical utilities of two items are very similar, there is no significant preference for either item, the buyer is indifferent. Yet, one item is purchased the other is not. This may seem banal, but utility is very mathematical in its very nature, and such a function is necesary to create realistic models of economic activity.
To illistrate these four concepts/functions in an economic model:
- goods are purchased based on risk: if there is too high a probability of an unfavorable return, the purchase will not be made by 'reasonable' buyers. Regardless of the statistical, classical utility of the commodity.
- Assuming risk is not a deciding factor in choosing between two items, the choice will often be made by 'reasonable' buyers based on the higher average return on investment.
- Buyers do not always choose based on reason. Preference may outweigh risk and classical utility. For example, gamboling.
- In the event that no significant bias for either item, the choice will be made at random.
[edit] Are formulas correctly written??
I was wondering if the formulas are correctly written. In the section on Utility functions in game theory, there are statments like: the probability of u is α(u) and the probability of υ is (1 - α)(υ). Now the formula doesn't make sense. Some expert please cleanup that section. It is misnformation rather than information.
Karthik Iyer
[edit] The "Utility in Game Theory" section is dodgey
I agree. The Utility in Game Theory section is ambiguous and non-standard.
I wrote a section on "Utility functions", which is a first attempt at replacing the material. However, I still need to write about Bernoulli utility function and the Expected Utility theorem, before we can "obselete" the existing section. When I get some time...
I like the approach/notation in Mas-Colell et al much better than Fudenberg/Tirole and Myerson. I haven't looked at Osbourne/Rubinstein.
- I agree -- the entire Utility in Game Theory section should be scrapped. I'll take a stab sketching the expected utility theorem. Amcfreely 23:45, 8 August 2005 (UTC)
--Clausen 07:18, 9 Oct 2004 (UTC)
[edit] Ordinal Utility
Ahh, I'm bit confused here. One can observe someone's act or activities (buying, walking, sleeping, whatever). But what purpose does it serve to define such activities in context of choise? If someone paid $1 for a Coke, isn't that the only observable fact? Why bring Pepsi, Milk or Ice Cream? Can anyone expand on this? <FWBOarticle>
Also, that whole paragraph is full of spelling and grammatical errors, and is rather badly written as well.
- Take a look at my rewrite. Amcfreely 04:58, 4 April 2006 (UTC)
- Most modern economists are just applied mathematicians, and as such need to express everything in those terms, even if it doesn't apply. 12.47.123.121 13:59, 5 May 2006 (UTC)
[edit] Risk Aversion and CES
The statement that: "CES (constant elasticity of substitution) utility is one with constant relative risk aversion" is generally not correct. A utility function with constant elasticity of intertemporal substitution is one with constant relative risk aversion (of the form (c^(1-t))/(1-t)). However CES can also be (x^a+y^a)^(1/a) if you're talking about intratemporal choice among two (or more) goods.
[edit] Merge Util
Should the the unreferenced page Util be merged here and redirected? The page Util is unreferenced and the topic appears better covered here, but the term is not identified in the article Utility. Jeepday 14:24, 16 February 2007 (UTC)
- Not only is the util article unreferenced, it discusses utility theory rather than the util itself (and does a poor job of it). There's certainly potential for an article about the unit, but turning that page into a redirect would be an improvement to it. -- Jonel | Speak 16:31, 16 February 2007 (UTC)]
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- Thanks for being BOLD Jonel. Signed Jeepday 13:03, 17 February 2007 (UTC)
vNM payoff is a major part of utility payoff, it should deserve to be a main article by its own right. It has much to do with game theory, rather than calculations. Moreover, it involves in people's choices and how they react, kind of like social science.
