ordinal utility

(redirected from Ordinal utility function)

ordinal utility

the (subjective) UTILITY or satisfaction that a consumer derives from consuming a product, measured on a relative scale. Ordinal utility measures acknowledge that the exact amount of utility derived from consuming products cannot be measured in discrete units, as implied by CARDINAL UTILITY measures. Ordinal measures instead involve the consumer ordering his or her preference for products, ranking products in terms of which product yields the greatest satisfaction (first choice), which product then yields the next greatest satisfaction (second choice), and the product which then yields the next greatest satisfaction (third choice), and so on. Such ordinal rankings give a clear indication about consumer preferences between products but do not indicate the precise magnitude of satisfaction as between the first and second choices and the second and third choices, etc.

Ordinal utility measures permit consumer preferences between two products to be shown in the form of INDIFFERENCE CURVES which depict various combinations of the two products that yield equal satisfaction to the consumer. Assuming ‘rational’ consumer behaviour (see ECONOMIC MAN), a consumer will always choose to be on the highest possible indifference curve, although the increase in satisfaction to be derived from moving from a lower to a higher indifference curve cannot be exactly determined. Nevertheless, INDIFFERENCE MAPS can be used to construct DEMAND CURVES. See DIMINISHING MARGINAL UTILITY.

References in periodicals archive ?
The function [u.sub.Gina](.) is an ordinal utility function for Gina if, whenever Gina ranks one bundle over a second bundle, this function assigns the first a higher number.
Transitive preference must be assumed in MRS theory for the choice bundle to be a global maximum, transitivity implies integrabiity, and integrability implies the existence of an ordinal utility function. With that understanding, Allen's MRS-based demand theory was consigned to oblivion.
This ordering is captured by his ordinal utility function. Moreover, individuals i and j might have different rankings of attribute bundles, and suitable estimation techniques (such as stated-preference surveys) are robust to such heterogeneity.
(2.) of course, Antonelli (1886) and Fisher (1892) both discussed ordinal utility functions before Voigt.
Under such conditions, when the analysis involves situations where the choice set cannot be partitioned with certainty into attainable and unattainable sectors, the von-Neumann and Morgenstern (NM) class of (expected) utility functions replace the standard ordinal utility functions of elementary economic analysis.

Site: Follow: Share:
Open / Close