ADMS 3300 Lecture Notes - Lecture 12: Fixed Cost, Multilinear Map, Risk Premium
Document Summary
Chapter 17 conflicting objectives ii - multi-attribute utility models with interactions. Methods to deal with multiple conflicting objectives. Decide how best to trade off increased value on one objective for lower value on another: additive preference model. Weighted sum of the utility of each objective: elements of the additive utility function. Finding utilities, a common score for each attribute i) proportional scoring ii) ratios iii) std. Finding weights i) pricing out ii) swing weighting iii) lottery weights. Utility function assessment in the presence of attribute interactions: substitute/ complementary attributes. Multi-attribute utility functions with interaction: direct assessment, multi-linear utility functions (with separability idea, required independence conditions. Mutual preferential independence for certain outcomes. Mutual utility independence for uncertain outcomes. Additive independence for uncertain outcomes and additive utility function. Now find the probability p to use in the reference gamble that will make you.