Utility Independence of Multiattribute Utility Theory is Equivalent to Standard Sequence Invariance of Conjoint Measurement
Utility independence is a central condition in multiattribute utility theory, where attributes of outcomes are aggregated in the context of risk. The aggregation of attributes in the absence of risk is studied in conjoint measurement. In conjoint measurement, standard sequences have been widely used to empirically measure and test utility functions, and to theoretically analyze them. This paper shows that utility independence and standard sequences are closely related: utility independence is equivalent to a standard sequence invariance condition when applied to risk. This simple relation between two widely used conditions in adjacent fields of research is surprising and useful. It facilitates the testing of utility independence because standard sequences are flexible and can avoid cancelation biases that affect direct tests of utility independence. Extensions of our results to nonexpected utility models can now be provided easily. We discuss applications to the measurement of quality-adjusted life-years (QALY) in the health domain.
|Keywords||Utility independence, conjoint measurement, multiattribute utility, nonexpected utility, standard sequences|
Bleichrodt, H., Doctor, J.N., Filko, M., & Wakker, P.P.. (2011). Utility Independence of Multiattribute Utility Theory is Equivalent to Standard Sequence Invariance of Conjoint Measurement. Journal of Mathematical Psychology, 1–25. Retrieved from http://hdl.handle.net/1765/26324