Psychophysical interpretation for utility measures

Yuqing He

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2012, vol. 6, No 2012-29, 35 pages

Abstract: The paper explores utility measures by combining experiments with mathematical derivations in the psychophysics paradigm. The analysis on the ultimatum game experiment reveals evidences for the utility threshold and thus supports Bernoulli's utility logarithmic law. Both experimental results and theoretical derivations show that the logarithmic law is suitable for the description of commodity choice and the power law for risk choice. The further mathematical demonstration indicates the logarithmic law for utility scaling to be a KleinRubin utility function, a utility function well defined in microeconomics. Based on this, the experimental utility measure is connected with the econometric model Linear Expenditure System, and presents an experimental procedure for testing the utility maximization hypothesis, which will resolve a long unsettled perplexity in a fundamental stone of economics since Gossen proposed it in 1854.

Keywords: psychophysics; ultimatum game; utility function; logarithmic law; power law (search for similar items in EconPapers)
JEL-codes: A12 D01 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dx.doi.org/10.5018/economics-ejournal.ja.2012-29
https://www.econstor.eu/bitstream/10419/60226/1/720191475.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:201229

DOI: 10.5018/economics-ejournal.ja.2012-29

Access Statistics for this article

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020) is currently edited by Dennis J. Snower

More articles in Economics - The Open-Access, Open-Assessment E-Journal (2007-2020) from Kiel Institute for the World Economy (IfW Kiel) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().