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Conditionally Additive Utility Representations

Wei-zhi Qin and Hendrik Rommeswinkel

MPRA Paper from University Library of Munich, Germany

Abstract: Advances in behavioral economics have made decision theoretic models increasingly complex. Utility models incorporating insights from psychology often lack additive separability, a major obstacle for decision theoretic axiomatizations. We address this challenge by providing representation theorems which yield utility functions of the form u(x,y,z)=f(x,z) + g(y,z). We call these representations conditionally separable as they are additively separable only once holding fixed z. Our representation theorems have a wide range of applications. For example, extensions to finitely many dimensions yield both consumption preferences with reference points Sum_i u_i(x_i,r), as well as consumption preferences over time with dependence across time periods Sum_t u_t(x_t,x_{t-1}).

Keywords: utility; representation theorem; additive; conditionally additive; ordered space (search for similar items in EconPapers)
JEL-codes: D01 D03 D11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-upt
Date: 2017-04-06
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