Thursday, February 12, 2004

Utility Function Explained

My skeptical friend from engineering asked, what made a utility function. How would I explain completeness, reflexivity, transitivity, countinuity, monotonicity and local non-satiation? In that order, I mumbled:

I’m looking at three fruits on the table: mango, durian, and papaya. 1) I like mango more than durian; and I like durian more than papaya. 2) I like mango more than papaya. 3) If mother adds a fourth fruit, a banana onto the table, and I happen to like it almost as much as I like mango, then I like banana more than durian or papaya. 4) I like two mangoes plus two durians more than one mango and one papaya only. 5) I still like two mangoes and one durian compared to one mango and one papaya. 6) I always like it if mother gives an extra slice of mango, no matter how small it is.

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