Empirical and theoretical relationships between value and utility functions

Two fundamentally different measurement approaches are used to model multiatribute preferences. The first, based on expected utility theory, uses preferences among gambles to construct a utility function, u, over multiattribute outcomes. The second, founded on difference measurement, asks for judgments about strength of preference to derive a value function, v. Our purposes are threefold: to clarify possible theoretical relationships between u and v; to demonstrate behavioral differences between u and v; and to discuss the usefulness of a u, v distinction for interpretation and application. Both the theory of functional equations and measurement theory uniqueness theorems provide closed form functional relationships among the four (additive and/or multiplicative) decomposed utility and value functions. Fischer (1977) provides the data to empirically examine relationships between u and v. © 1984.

Duke Scholars

Author Gregory W. Fischer Fuqua School of Business