Indifference Curves and Budget Constraints > Matching Preferences and Utility

Solution

To compare the performance of the utility functions, compute the utility of each bundle under each candidate function:

BundleJBRankJ*BJ*J+B
111worst12
221second25
312third23
431best310

The first utility function is wrong: it assigns the same value to bundles 2 and 3 even though the individual says that bundle 2 is better than bundle 3. The second utility function works: it ranks the bundles the same way the individual did.

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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 10/26/2004