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ERIC Number: EJ916551
Record Type: Journal
Publication Date: 2011-Mar
Pages: 16
Abstractor: As Provided
Reference Count: 56
ISSN: ISSN-0278-7393
An Empirical Assessment of the Form of Utility Functions
Kirby, Kris N.
Journal of Experimental Psychology: Learning, Memory, and Cognition, v37 n2 p461-476 Mar 2011
Utility functions, which relate subjective value to physical attributes of experience, are fundamental to most decision theories. Seven experiments were conducted to test predictions of the most widely assumed mathematical forms of utility (power, log, and negative exponential), and a function proposed by Rachlin (1992). For pairs of gambles for real monetary gains, undergraduate and nonstudent subjects either reported an "equalizing amount" for 1 outcome that made the gambles subjectively equal or chose between gambles where the amounts were varied across trial, which allowed the equalizing amount to be estimated from their pattern of choices. Using a novel method that eliminates several limitations of previous research, I manipulated the outcomes across trials such that each type of utility function predicted a linear relationship between the equalizing amounts and the amounts of the other outcomes, and made point predictions for either the slope or intercept of that relationship. In a meta-analysis across experiments, systematic departures from the point predictions were observed for each type of utility function. Thus, the data imply that despite their historical importance and incorporation in many psychological and economic decision theories, the most widely assumed models of utility are incorrect. (Contains 2 tables and 3 figures.)
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Publication Type: Journal Articles; Reports - Evaluative
Education Level: Higher Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A