The Multiattribute Utility Tree

Ali E. Abbas ()
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Ali E. Abbas: Department of Industrial and Enterprise Systems Engineering, University of Illinois at Urbana--Champaign, Urbana, Illinois 61801

Decision Analysis, 2011, vol. 8, issue 3, 180-205

Abstract: This paper introduces the notion of a multiattribute utility tree. This graphical representation decomposes the von Neumann--Morgenstern utility of a multiattribute consequence into a sum of products of indifference probability assessments of binary gambles. The utility tree displays the sequence of gambles required to elicit the utility value of a consequence. In addition, it enables the analyst to conduct consistency checks on the indifference assessments provided by the decision maker and to change the order of the assessments based on her comfort level. Once the indifference assessments are provided, the utility value of a consequence can be obtained by direct rollback analysis. On a continuous domain, the utility tree decomposes the functional form of a multiattribute utility function into a sum of products of normalized conditional utility functions. Each attribute in the expansion is conditioned on the boundary values of the attributes expanded before it. This formulation provides a general method for deriving the functional form of a multiattribute utility function under a wide variety of conditions. It also leads to several new independence concepts such as “boundary independence,” which is a weaker condition than utility independence, and “corner independence,” which makes higher-order independence assertions. Reversing the order of the nodes in the tree relates several widely used notions of utility independence found in the literature.

Keywords: multiattribute utility; decision trees; utility independence; interpolation independence; risk aversion (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ordeca:v:8:y:2011:i:3:p:180-205

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