Two-attribute utility function

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Someday you probably will face a choice among job offers. Aside from the nature of the job itself, two attributes that are important for many people are salary and location. Some people prefer large cities, others prefer small towns. Some people do not have strong preferences about the size of the town in which they live; this would show up as a low weight for the population-size attribute in a multiattribute utility function.

Assess a two-attribute utility function for salary (X) and population size (Y):

a. Determine whether your preferences for salary and town size are mutually utility independent.

b. If your preferences display mutual utility independence, assess the two individual utility functions and the weights kX and kY. Draw indifference curves for your as- sessed utility function. If your preferences do not display mutual utility indepen- dence, then you need to think about alternative approaches. The simplest is to assess several utility points as described at the beginning of this chapter and "eyeball" the indifference curves.

c. What other attributes are important in a job decision? Would the two-attribute utility function you just assessed be useful as a first approximation if many of the other at- tributes were close in comparing two jobs?

Reference no: EM13968579

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