Utility is the tendency of an object to produce happiness or prevent unhappiness for an individual or a community.

How can we assign utilities to represent preferences?

Interval Scales

  • Assign to each outcome a value such that and
  • Transformation is linear
  • Called an ordinal transformation

Ordinal Scales must satisfy the following properties:

  1. Completeness: or or
  2. Asymmetry: if then it is false that
  3. Transitivity: if and then

Infinite Utility

An agent values A infinitely relative to B and C if we deny Continuity: for any

The agent is willing to trade B for any gamble that offers a positive chance of A, when the ‘losing outcome’ is C.)