Harman Patil (Editor)

Additive utility

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In economics, additive utility is a cardinal utility function with the sigma additivity property.

Additivity (also called: linearity or modularity) means that "the whole is equal to the sum of its parts". I.e, the utility of a set of items is the sum of the utilities of each item separately. It says that for every bundle A :

u ( A ) = u ( ) + x A u ( x )

An equivalent definition is: for all sets A and B :

u ( A ) + u ( B ) = u ( A B ) + u ( A B )

An additive utility function is characteristic of independent goods. For example, an apple and a hat are considered independent: the utility a person receives from having an apple is the same whether or not he has a hat, and vice versa. A typical utility function for this case is given at the right.

References

Additive utility Wikipedia


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