Utility is always subjective and refers to the amount of personal or institutional satisfaction of an alternative. The personal satisfaction associated with the outcome of good food, a holiday trip or a sports car depends on taste, interests and needs. Institutional satisfaction associated with the outcome of employment strategies or treatment selection predominantly depends on economic considerations. It is assumed that both individuals and institutions try to maximize their utility. Choosing alternatives according to their utility lies at the heart of all summative evaluation procedures.

Prescriptive Utility Theory

Utility Function

The measurement of utility has a long history in economics, starting with the measurement of preferences on an ordinal scale. Since von Neumann and Morgenstern (1947) developed the axiomatic foundation of utility, it can be measured on ...

  • Loading...
locked icon

Sign in to access this content

Get a 30 day FREE TRIAL

  • Watch videos from a variety of sources bringing classroom topics to life
  • Read modern, diverse business cases
  • Explore hundreds of books and reference titles