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Suggests a new understanding of the category of economic value. According to this understanding, economic value is the unity of economic utility and economic costs…
Suggests a new understanding of the category of economic value. According to this understanding, economic value is the unity of economic utility and economic costs. Interprets these categories of utility and costs as relative, and imminently implying one another. There exists a specific attitude of man towards the limited goods which are involved in his teleological activity. On the basis of this new understanding of economic value, attempts to give a new explanation of the law of increasing marginal costs, as the opposite form of manifestation of the law of diminishing marginal utility. Suggests an original interpretation of global and local criteria for optimum, and of an economic mechanism for comparison of costs and utility. Proposes many ideas which proceed from the teleological understanding of man’s activity and which are in harmony with the ideas and principles of econometrics.
This case study describes an application of utility analysis to guide decisions regarding retention and operation of various selection system components (i.e., tests and…
This case study describes an application of utility analysis to guide decisions regarding retention and operation of various selection system components (i.e., tests and interviews). Selection processes for two “high throughput” selection systems (Meter Reader and Customer Service Representative) were examined to improve cost effectiveness and reduce cycle time (time to produce qualified candidates). Based on utility outcomes and client considerations, the interview was retained with modifications in one selection process, and deleted from the other. Insights gained from gathering data needed to conduct the utility analysis helped guide further refinements of the selection systems in which the tests and interviews were applied, drastically reducing the time needed to fill open positions.
Electric Utility Diversification and Efficient Capital Markets Over 60% of investor owned electric utilities have experimented with diversification into lines of business…
Electric Utility Diversification and Efficient Capital Markets Over 60% of investor owned electric utilities have experimented with diversification into lines of business other than the traditional generation, transmission, and distribution of electricity. They diversify for a variety of reasons, but a primary goal is to improve their overall financial performance. Existing studies have found that diversified utilities outperform non‐diversified utilities. Measures of performance have included EPS growth, price‐earnings multiples, market‐book ratios and internal rates of return. However, many of these studies do not compare performance on a risk‐adjusted basis nor indicate whether differences are statistically significant. In contrast, this study compares performance using the efficient market hypothesis. Regression results indicate that there is no significant difference in risk between portfolios comprised of diversified utilities and non‐diversified utilities. Furthermore, no significant difference in return was observed. The performance of the two portfolios does not appear to differ in risk or return. These results tend to support the efficient market hypothesis concerning stockholders' inability to gain an advantage from publicly available information. Differences in company performance that are anticipated and already reflected in stock price do not result in differences in returns to stockholders.
An alternative method of utility analysis based on tenure, rather than dollar value performance, is presented. The standard deviation of employees' tenure with an organisation becomes the individual differences parameter, rather than SDy, and mean dollar value performance (Y) provides the scaling onto dollars. Results suggest that the new model produces utility estimates that are not significantly different from the classic Brogden‐Cronbach‐Gleser model.
This study compared per selectee utility estimates for the job of medical claims examiner based on applications of the Brogden‐Cronbach‐Gleser (BCG) and Raju‐Burke‐Normand…
This study compared per selectee utility estimates for the job of medical claims examiner based on applications of the Brogden‐Cronbach‐Gleser (BCG) and Raju‐Burke‐Normand (RBN) utility analysis models. The RBN model's per selectee utility estimate, based on a transformed observed performance rating standard deviation (σR), was closest to the per selectee utility estimate computed with an empirically‐derived σY value. The implications of these results for estimating human resource program utility are discussed.
To many observers, the area of utility analysis appears disjointed, unfocused, and they wonder where it is going. Despite the fact that there is almost 20 years of…
To many observers, the area of utility analysis appears disjointed, unfocused, and they wonder where it is going. Despite the fact that there is almost 20 years of experience with utility analysis since researchers brought it into the modern era, this approach to cost/benefit analysis has not caught on widely and it is not a standard procedure in the assessment of HR interventions. I argue that utility analysis remains an appropriate area of inquiry, but currently it suffers from three broad sets of problems: (1)from an applied research perspective there is often a failure to focus on critical, value‐adding activities that managers regard as relevant and important to their own success; (2) inability to communicate the results of utility analyses in a persuasive, credible manner to operating executives; and (3) technical problems, both theoretical and operational. In my view, none of these is insurmountable, but we must address each one in a systematic manner if the potential of utility analysis to help guide organizational decision making is to be realized in practice.
For over 60 years, Lerner's (1944) probabilistic approach to the welfare evaluation of income distributions has aroused controversy. Lerner's famous theorem is that, under ignorance regarding who has which utility function, the optimal distribution of income is completely equal. However, Lerner's probabilistic approach can only be applied to compare distributions with equal means when the number of possible utility functions equals the number of individuals in the population. Lerner's most controversial assumption that each assignment of utility functions to individuals is equally likely. This paper generalizes Lerner's probabilistic approach to the welfare analysis of income distributions by weakening the restrictions of utilitarian welfare, equal means, equal numbers, and equal probabilities and a homogeneous population. We show there is a tradeoff between invariance (measurability and comparability) and the information about the assignment of utility functions to individuals required to evaluate expected social welfare.
This chapter reviews models of decision-making and choice under conditions of certainty. It allows readers to position the contribution of the other chapters in this book in the historical development of the topic area.
Bounded rationality is defined in terms of a strategy to simplify the decision-making process. Based on this definition, different models are reviewed. These models have assumed that individuals simplify the decision-making process by considering a subset of attributes, and/or a subset of choice alternatives and/or by disregarding small differences between attribute differences.
A body of empirical evidence has accumulated showing that under some circumstances the principle of bounded rationality better explains observed choices than the principle of utility maximization. Differences in predictive performance with utility-maximizing models are however small.
Originality and value
The chapter provides a detailed account of the different models, based on the principle of bounded rationality, that have been suggested over the years in travel behaviour analysis. The potential relevance of these models is articulated, model specifications are discussed and a selection of empirical evidence is presented. Aspects of an agenda of future research are identified.
Measuring risk aversion is sensitive to assumptions about the wealth in subjects’ utility functions. Data from the same subjects in low- and high-stake lottery decisions allow estimating the wealth in a pre-specified one-parameter utility function simultaneously with risk aversion. This paper first shows how wealth estimates can be identified assuming constant relative risk aversion (CRRA). Using the data from a recent experiment by Holt and Laury (2002a), it is shown that most subjects’ behavior is consistent with CRRA at some wealth level. However, for realistic wealth levels most subjects’ behavior implies a decreasing relative risk aversion. An alternative explanation is that subjects do not fully integrate their wealth with income from the experiment. Within-subject data do not allow discriminating between the two hypotheses. Using between-subject data, maximum-likelihood estimates of a hybrid utility function indicate that aggregate behavior can be described by expected utility from income rather than expected utility from final wealth and partial relative risk aversion is increasing in the scale of payoffs.