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Article
Publication date: 1 July 2011

Wang Wen Hui

The purpose of this paper is to argue that Bernoulli's “utility function solution to the St Petersburg paradox” was wrong and to find a new method to solve the paradox.

Abstract

Purpose

The purpose of this paper is to argue that Bernoulli's “utility function solution to the St Petersburg paradox” was wrong and to find a new method to solve the paradox.

Design/methodology/approach

This goal is attained through two ways: using Bernoulli's and Kramer's utility function to construct new paradoxes; and designing and implementing a new St Petersburg game which does not carry the effect of diminishing marginal utility.

Findings

In this paper, the author finds that Bernoulli's “utility function solution to the St Petersburg paradox” was wrong, and also finds a new model to solve the paradox, which is also a brand‐new model of estimates under uncertainty.

Research limitations/implications

Bernoulli put forward the diminishing marginal utility of currency and thus accordingly provided the utility function solution to solve the paradox. This paper indicates that the Bernoulli's utility function solution does not work. Thus, further research needs to be taken in several aspects: is the diminishing marginal utility of currency tenable? Does the marginal utility of currency decrease monotonically? Are concave utility functions represented by negative index functions which are widely used in theoretical study reasonable?

Practical implications

The paper proposes a brand‐new possible research idea and direction for economic theoretical researches based on uncertainty.

Originality/value

This paper proved the untenability of the utility function solution to solve the St Petersburg paradox for the first time and proposed the pioneering “risk adjustment model” of estimates under uncertainty.

Details

China Finance Review International, vol. 1 no. 3
Type: Research Article
ISSN: 2044-1398

Keywords

Article
Publication date: 15 April 2022

Rahul Shrivastava, Dilip Singh Sisodia and Naresh Kumar Nagwani

In a multi-stakeholder recommender system (MSRS), stakeholders are the multiple entities (consumer, producer, system, etc.) benefited by the generated recommendations…

Abstract

Purpose

In a multi-stakeholder recommender system (MSRS), stakeholders are the multiple entities (consumer, producer, system, etc.) benefited by the generated recommendations. Traditionally, the exclusive focus on only a single stakeholders' (for example, only consumer or end-user) preferences obscured the welfare of the others. Two major challenges are encountered while incorporating the multiple stakeholders' perspectives in MSRS: designing a dedicated utility function for each stakeholder and optimizing their utility without hurting others. This paper proposes multiple utility functions for different stakeholders and optimizes these functions for generating balanced, personalized recommendations for each stakeholder.

Design/methodology/approach

The proposed methodology considers four valid stakeholders user, producer, cast and recommender system from the multi-stakeholder recommender setting and builds dedicated utility functions. The utility function for users incorporates enhanced side-information-based similarity computation for utility count. Similarly, to improve the utility gain, the authors design new utility functions for producer, star-cast and system to incorporate long-tail and diverse items in the recommendation list. Next, to balance the utility gain and generate the trade-off recommendation solution, the authors perform the evolutionary optimization of the conflicting utility functions using NSGA-II. Experimental evaluation and comparison are conducted over three benchmark data sets.

Findings

The authors observed 19.70% of average enhancement in utility gain with improved mean precision, diversity and novelty. Exposure, hit, reach and target reach metrics are substantially improved.

Originality/value

A new approach considers four stakeholders simultaneously with their respective utility functions and establishes the trade-off recommendation solution between conflicting utilities of the stakeholders.

Details

Data Technologies and Applications, vol. 56 no. 5
Type: Research Article
ISSN: 2514-9288

Keywords

Article
Publication date: 1 February 1978

KATHERINE K. YUNKER

If everyone were indifferent between more and less and between this and that, the problems of allocating scarce resources would be trivialized. The necessity of choice, whether…

Abstract

If everyone were indifferent between more and less and between this and that, the problems of allocating scarce resources would be trivialized. The necessity of choice, whether social or individual, would seem absurd. However, people persist in preferring certain “states of the world” to others. As a society is made up of individuals, it seems reasonable that a society's preferences should be “made up” of the preferences of its members. Therefore, any social welfare function, W, should be a function of the individual welfare functions, wi. That is,

Details

Studies in Economics and Finance, vol. 2 no. 2
Type: Research Article
ISSN: 1086-7376

Article
Publication date: 1 December 1997

James H. Bookbinder and Maureen E. Lynch

Decision analysis in management science employs concepts from economics such as utility functions and indifference curves. A utility function U models the “satisfaction” that a…

1997

Abstract

Decision analysis in management science employs concepts from economics such as utility functions and indifference curves. A utility function U models the “satisfaction” that a customer obtains from logistics service. Here U depends on two attributes (lead time, fill rate) whose values more directly represent customer service. The shipper can, at additional cost, improve either or both of these attributes. Constructs and maximizes various utility functions U given a total budget B for distribution service. Finds that without increasing the budget overall logistics service can often be improved from the customer’s point of view. Whether U is additive or multiplicative, a customer’s utility resulting from the optimal lead time and fill rate is typically 20 per cent higher than when those attribute levels are set intuitively (without reference to customer preferences and tradeoffs expressed by U). Gives some introduction to decision analysis (certainty equivalent, risk aversion, …) to aid in understanding the functional forms employed for U and methods of solution, rendering the paper more self‐contained.

Details

International Journal of Physical Distribution & Logistics Management, vol. 27 no. 9/10
Type: Research Article
ISSN: 0960-0035

Keywords

Article
Publication date: 18 July 2016

Wenxue Lu, Lihan Zhang and Fan Bai

The learning ability on critical bargaining information contributes to accelerating construction claim negotiations in the win-win situation. The purpose of this paper is to study…

Abstract

Purpose

The learning ability on critical bargaining information contributes to accelerating construction claim negotiations in the win-win situation. The purpose of this paper is to study how to apply Zeuthen strategy and Bayesian learning to simulate the dynamic bargaining process of claim negotiations with the consideration of discount factor and risk attitude.

Design/methodology/approach

The authors first adopted certainty equivalent method and curve fitting to build a party’s own curve utility function. Taking the opponent’s bottom line as the learning goal, the authors introduced Bayesian learning to refine former predicted linear utility function of the opponent according to every new counteroffer. Both parties’ utility functions were revised by taking discount factors into consideration. Accordingly, the authors developed a bilateral learning model in construction claim negotiations based on Zeuthen strategy.

Findings

The consistency of Zeuthen strategy and the Nash bargaining solution model guarantees the effectiveness of the bilateral learning model. Moreover, the illustrative example verifies the feasibility of this model.

Research limitations/implications

As the authors developed the bilateral learning model by mathematical deduction, scholars are expected to collect empirical cases and compare actual solutions and model solutions in order to modify the model in future studies.

Practical implications

Negotiators could refer to this model to make offers dynamically, which is favorable for the parties to reach an agreement quickly and to avoid the escalation of claims into disputes.

Originality/value

The proposed model provides a supplement to the existing studies on dynamic construction claim negotiations.

Details

Engineering, Construction and Architectural Management, vol. 23 no. 4
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 29 November 2018

Satish Kumar

The purpose of this paper is to examine the significance of skewness in maximizing the investor utility using the daily data for eight sectors listed on the National Stock…

Abstract

Purpose

The purpose of this paper is to examine the significance of skewness in maximizing the investor utility using the daily data for eight sectors listed on the National Stock Exchange of India.

Design/methodology/approach

The analysis is carried out in three different steps. In the first part, the author analyzes the monthly stock returns and the important financial ratios – price-to-book (PB) ratio, price-earnings (PE) ratio and dividend yield (DY). Second, the author tests the sector-wise return predictability using Westerlund and Narayan (2012) flexible generalized least squares estimator. Third, the author compares the mean–variance–skewness (MVS) utility function with the mean–variance (MV) utility function.

Findings

The author forecasts the sectoral stock returns using three financial ratios – PB ratio, PE ratio and DY – as predictors. The results indicate that sectoral stock returns are significantly predicted by these financial ratios. The author then formulates trading strategies by including skewness in the utility function and finds that the investor utility is high when the utility function includes skewness as opposed to when the skewness is excluded.

Originality/value

The author extends the MV utility function to the MVS utility function and shows that the Indian stock market is more profitable when the investor uses a MVS utility function which highlights the main contribution to the literature.

Details

International Journal of Emerging Markets, vol. 13 no. 5
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 31 July 2009

José Rigoberto Parada Daza

The purpose of this paper is to develop an analytical model for appraising and measuring corporate social responsibility (CSR). The theoretical and conceptual grounds that sustain…

6877

Abstract

Purpose

The purpose of this paper is to develop an analytical model for appraising and measuring corporate social responsibility (CSR). The theoretical and conceptual grounds that sustain the model are based on previous approaches.

Design/methodology/approach

The utility function, which is the basis of a company's economic dimension, is analyzed in its philosophical and ethical setting, concentrating largely on the Utilitarian and Hedonistic schools and a maximizing agent, the “homo oeconomicus”.

Findings

The resulting new approach permits an analytical explanation of the behavior of a company and its owners when incorporating both economic rationality (“homo oeconomicus”) and social responsibility.

Originality/value

The quantitative determination of a global indicator for social responsibility is shown, as is the development of a method for calculating a monetary value of CSR.

Details

Social Responsibility Journal, vol. 5 no. 3
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 2 March 2020

Yan Song, Xin Yun Li, Yi Li and Xianpei Hong

The purpose of this paper is to establish a deterministic equivalent income model (DEIM) based on the risk cost (RC) and risk aversion of investors. The model fully considers both…

Abstract

Purpose

The purpose of this paper is to establish a deterministic equivalent income model (DEIM) based on the risk cost (RC) and risk aversion of investors. The model fully considers both subjective and objective factors that affect risk investment and reasonably evaluates risk investment schemes to choose the correct investment scheme and gain greater investment returns.

Design/methodology/approach

The utility function is used to measure the extent to which an investor is satisfied by investment returns in various scenarios. Risk aversion expresses subjective attitude of investors to risk. RC represents risk loss in currency. This methodology is based on risk aversion function, utility function and RC theory to establish DEIM.

Findings

This study shows that investors with different risk preferences have different certainty equivalent returns (CER), so their choices of investment options change accordingly.

Practical implications

In this paper, the authors use DEIM to test an investment case and conclude that the CER and investment scheme both change with different risk preferences. At the same time, case analysis shows that DEIM is reasonable and stable when evaluating risk investment schemes.

Originality/value

In this study, the authors innovate by introducing both the RC and risk aversion degree into risk investment schemes evaluation and by deriving a utility function from the absolute risk aversion function to build a utility decision matrix and establish DEIM. The model combines the subjective and objective factors that influence risk investment decisions.

Details

Kybernetes, vol. 50 no. 2
Type: Research Article
ISSN: 0368-492X

Keywords

Article
Publication date: 4 May 2010

Saleh Abu Dabous and Sabah Alkass

A bridge network is a major capital asset that requires continuing investment in order to maintain the network within acceptable limits of safety and serviceability. Ranking and…

1149

Abstract

Purpose

A bridge network is a major capital asset that requires continuing investment in order to maintain the network within acceptable limits of safety and serviceability. Ranking and prioritizing procedures have been widely used by several departments of transportation to select bridges for intervention and to distribute the available funds among competing projects. The available ranking and prioritizing procedures have various drawbacks, and an improved, rational ranking and prioritizing procedure is needed. The paper aims to address these issues.

Design/methodology/approach

The requirements and characteristics of an innovative ranking and prioritizing method are identified during interviews with professionals involved in bridge management. Based on these requirements, multi‐attribute utility theory (MAUT) is selected to develop the method. A technique to develop utility functions based on the analytical hierarchy process (AHP) is discussed. A hierarchy structure that captures the decision‐making elements is presented. A case study is used to demonstrate the applicability and the validity of the proposed ranking method.

Findings

The research findings have identified the decision objectives and the criteria essential to rank and prioritize bridge projects, and these are included within a framework to rank and prioritize bridge projects while incorporating experts' input in the process.

Practical implications

The proposed framework includes weights for the various objectives and recommends utility functions to evaluate the different attributes. In addition, the framework provides flexibility to adjust the weights and to modify the utility functions to reflect network‐specific characteristics. This method can be used by departments of transportation to rank bridges in a network, even incorporating conflicting criteria, and it can be integrated within an already implemented bridge management methodology.

Originality/value

Ranking and prioritizing projects are essential steps in bridge management. Current methods for ranking and prioritizing bridge projects are associated with various drawbacks. This paper proposes an innovative ranking method for bridge networks, based on MAUT. This theory provides flexibility for the decision makers in expressing their degree of satisfaction with each bridge attribute.

Details

Engineering, Construction and Architectural Management, vol. 17 no. 3
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 1 April 2005

Ana Paula Martins

Aims to analyse the labour market outcome when there are two unions in the industry, representing heterogeneous workers – imperfect substitutes in production.

Abstract

Purpose

Aims to analyse the labour market outcome when there are two unions in the industry, representing heterogeneous workers – imperfect substitutes in production.

Design/methodology/approach

Competition between union policies are viewed in terms of both employment and wage strategies. Results for substitutes and complements are inspected. Attention is given to the strategic behaviour of the unions, towards one another and/or the employer side. Cooperation is modelled using the Nash‐maximand approach.

Findings

Gathers some notes and enlargements to the standard collective bargaining problem in which unions maximise utility. Extends the framework to model union competition behaviour for jobs and/or employment that reproduces the standard market product analysis of imperfect competition. Focuses on heterogeneous labour.

Research limitations/implications

The analysis concentrates on the case of union duopoly, but can easily be enlarged to the n‐union setting – which is left for further investigation.

Originality/value

A simple analytical example with Stone‐Geary union utility functions and a linear labour demand system is forwarded.

Details

International Journal of Social Economics, vol. 32 no. 4
Type: Research Article
ISSN: 0306-8293

Keywords

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