Article ID: | iaor2010443 |
Volume: | 68 |
Issue: | 1 |
Start Page Number: | 69 |
End Page Number: | 99 |
Publication Date: | Feb 2010 |
Journal: | Theory and Decision |
Authors: | Abbas Ali E |
We present a method to characterize the preferences of a decision maker in decisions with multiple attributes. The approach modifies the outcomes of a multivariate lottery with a multivariate transformation and observes the change in the decision maker's certain equivalent. If the certain equivalent follows this multivariate transformation, we refer to this situation as multiattribute transformation invariance, and we derive the functional form of the utility function. We then show that any additive or multiplicative utility function that is formed of continuous and strictly monotonic utility functions of the individual attributes must satisfy transformation invariance with a multivariate transformation. This result provides a new interpretation for multiattribute utility functions with mutual utility independence as well as a necessary and sufficient condition that must be satisfied when assuming these widely used functional forms. We work through several examples to illustrate the approach.