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Negative hedonistic utilitarianism thinks of utility in terms of hedonic mental states such as suffering and unpleasantness. [6] Negative Average Preference Utilitarianism [ 15 ] makes the same assumptions on what is good as negative preference utilitarianism, but states that the average number (per individual) of preferences frustrated should ...
The word utility is used to mean general well-being or happiness, and Mill's view is that utility is the consequence of a good action. Utility, within the context of utilitarianism, refers to people performing actions for social utility. By social utility, he means the well-being of many people.
The expected utility of the above bet (with a 50% chance of receiving 100 and a 50% chance of receiving 0) is = (() + ()) /, and if the person has the utility function with u(0)=0, u(40)=5, and u(100)=10 then the expected utility of the bet equals 5, which is the same as the known utility of the amount 40. Hence the certainty equivalent is 40.
Loss aversion, where the perceived disutility of giving up an object is greater than the utility associated with acquiring it. [ 73 ] (see also Sunk cost fallacy ) Pseudocertainty effect , the tendency to make risk-averse choices if the expected outcome is positive, but make risk-seeking choices to avoid negative outcomes.
Inferiority, in this sense, is an observable fact relating to affordability rather than a statement about the quality of the good. As a rule, these goods are affordable and adequately fulfil their purpose, but as more costly substitutes that offer more utility become available, the use of the inferior goods diminishes.
Prospect theory and loss aversion suggests that most people would choose option B as they prefer the guaranteed $920 since there is a probability of winning $0, even though it is only 1%. This demonstrates that people think in terms of expected utility relative to a reference point (i.e. current wealth) as opposed to absolute payoffs.
A bad is the opposite of a good, because its consumption or presence lowers the customer's utility. With goods, a two-party transaction results in the exchange of money for some object, as when money is exchanged for a car.
Concave preferences are the opposite of convex, where when , the average of A and B is worse than A. This is because concave curves slope outwards, meaning an average between two points on the same indifference curve would result in a point closer to the origin, thus giving a lower utility. [25]