An Additive Group Utility for a Fund Manager

Robert F. Bordley
Additional contact information
Robert F. Bordley: Operating Sciences Department, General Motors Research Labs, Warren, Michigan 48090

Management Science, 1988, vol. 34, issue 7, 836-842

Abstract: The additive utility formula developed by Harsanyi specifies how a rational ethical individual acting on behalf of other people ought to behave. Unfortunately the formula is not invariant to arbitrary utility transformations and hence requires interpersonal comparisons of utility. Many economists have also attacked the formula on ethical grounds. This paper transplants the Harsanyi paradigm to a new context: that of fund management. We add three further axioms to the Harsanyi argument and deduce the weighted group utility formula with each individual's weight equal to the inverse of the marginal utility of his investment in the fund. These weights make our formula invariant to arbitrary utility transformations which eliminates the problem of interpersonal comparisons of utility. We also explore a number of other properties of this group utility function.

Keywords: group decision making; investment; utility (search for similar items in EconPapers)
Date: 1988
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.34.7.836 (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:inm:ormnsc:v:34:y:1988:i:7:p:836-842

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().