Modeling the Maximum Perceived Utility Consensus Based on Prospect Theory

Dong Cheng (), Yong Wu (), Yuxiang Yuan (), Faxin Cheng () and Dianwei Chen ()
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Dong Cheng: Donghua University
Yong Wu: Donghua University
Yuxiang Yuan: Xidian University
Faxin Cheng: Jiangsu University
Dianwei Chen: Donghua University

Group Decision and Negotiation, 2024, vol. 33, issue 5, No 3, 975 pages

Abstract: Abstract Expected utility consensus models aim to obtain a consensus solution with the maximum utility of the group. However, decision-makers (DMs) are often bounded rational in practice and their loss aversion behaviors have an important impact on the consensus-reaching, which may lead to a deviation between the actual decision and the theoretical solution. To solve this issue, we propose a maximum perceived utility consensus model based on prospect theory (MPUCM-PT) to maximize the perceived utility of the group under a budget constraint. The individual perceived utility is measured by the prospect value, and individual adjusted opinion is taken as an endogenous reference point. To explore the influence of different consensus levels on consensus modeling, we further develop a soft MPUCM-PT based on soft consensus measure. Then, upper and lower bounds of the optimal budget are given to provide a reference for setting a reasonable budget. Finally, the proposed consensus models are verified by the case of China’s Taihu Lake pollution control. Results show that, with the same level of budget, the utility satisfaction obtained by the MPUCM-PT is higher than that obtained by expected utility consensus models. Moreover, the group perceived utility based on prospect theory is also improved.

Keywords: Consensus decision-making; Perceived utility; Loss aversion; Prospect theory; Endogenous reference point (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10726-023-09871-9

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