RSM341H1 Lecture Notes - Lecture 4: Ordinal Utility, Well-Order, Choice Function
Document Summary
Assume decision maker always chooses options that they like at least as much as every other option on the menu. Decision maker"s preferences are defined over the choice domain. Exactly one of the following is true for any (x,y) Rational preference relations can be translated to real numbers. Preference relation is rational if it is both total and transitive. Rules out circular reasoning and implies decision maker capable of chaining together sequence of comparisons. Note: no two distinct numbers can be equal but can be indifferent between two different options. Utility u(x) of any single option does not have any meaning. For a well-ordered nonempty finite set, there is always one member that is not ranked above any other. Set obtained by removing least members also has at least one least member. This means all rational preferences have a utility representation. Infinitely many different utility functions can represent same preference relation. Utility function does not represent scale of preferences.
