cardinal utility

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cardinal utility

the (subjective) UTILITY or satisfaction that a consumer derives from consuming a product, measured on an absolute scale. This implies that the exact amount of utility derived from consuming a product can be measured, and early economists suggested that utility could be measured in discrete units referred to as UTILS. However, because it proved impossible to construct an accurate measure of cardinal utility, ORDINAL UTILITY measures replaced the idea of cardinal utility in the theory of CONSUMER EQUILIBRIUM.

See DIMINISHING MARGINAL UTILITY.

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Hicks explained that, in this way, we can totally separate the consumer's indifference map from any quantitative concept of utility, thereby eliminating any backdoor to cardinal utility. The only necessary assumption is that an individual has a "scale of preferences" on which he subjectively ranks different bundles of goods.

John Hicks and the beauty of logic

Much work in economics distinguishes between ordinal and cardinal utility. For purposes of the present discussion, the distinction can be framed as follows.

Such a proposal imposes an additional demand upon such surveys: namely, that respondents have the same preferences, be uncorrupted by evaluation error or miscommunication, and respond to the survey by applying a common cardinal utility function to their current attributes.

Happiness surveys and public policy: what's the use?

For example, Harsanyi applies cardinal utility to welfare economics (1955, p.

A praxeological assessment of subjective value

To help illuminate this solution, we use the equivalent relation proposed by Allais, namely, cardinal utility function, V ~ a + [log C/log 2], where V is the psychological monetary value of the prospect, a is a proportional constant, and C is the player's capital (Allais, 1990, 3).

Maurice Allais: a review of his major works, a memoriam, 1911-2010

Indeed, cardinal scales can be compared in an ordinal ranking after Arrow (1974): "Obviously, a cardinal utility implies an ordinal preference but not vice versa".

Multimoora optimization used to decide on a bank loan to buy property/Optimizavimas multimoora metodu imant banko paskola nekilnojamam turtui pirkti

To derive a Neural Network algorithm we make the assumption, that there is an unknown cardinal utility U(x) an object x provides to the customer.

Neuroscience in economics

In 'Sunto di alcuni capitoli di un nuovo trattato di economia pura' (1900), Pareto applied an ordinal transformation function to a cardinal utility function, expressed pure economic equilibrium as a system of equations where utility is based on preference ordering, and highlighted the equivalence of the equilibrium result for both cardinal and ordinal specifications of utility.

One hundred years from today

Early in the twentieth century, behaviorists in economics worried about the meaningfulness of ascribing cardinal utility functions to agents (that is, functions measuring the strength of preference, not just reflecting preference rankings).

The Foundations of Causal Decision Theory. (Book Reviews)

Van Praag and Van der Sar (1988) attempted to deal with the cardinal utility objection.

An ordered-response income adequacy model

An individual's cardinal utility function for hybrid bundles would be determined by her ranking of bundles plus further facts about her preferences (for example, her ranking of bundle lotteries or her time-tradeoff preferences).

Happiness surveys and public policy: what's the use?

Bruni challenges the received view that 'Pareto was confused', and rejects the existing minority views, such as the propositions that Pareto continued his use of cardinal utility for reasons of pedagogy, political expedience or laziness.