The determination and scaling of a bivariate utility function

Abstract

A considerable body of evidence exists which indicates a lack of a monotonic relationship between real rewards and the utility for the corresponding outcomes in an experimental game environment. This phenomenon we have called utility function confounding. It often appears that individuals are influenced in their choice behavior not only by their expected rewards, but also by the relative amount of their reward to that of the other party or parties to the game. The authors develop a bivariate utility function designed to accommodate both utility for own reward and for own reward relative to that of the other party. This model is then shown to be general enough to encompass several distinct types of utility function confounding which have appeared in experimental situations. While difficulties remain in the measures required of the model, the authors' main hope is that this neglected aspect of subjects' utilities will receive the attention that it deserves, to the benefit of more meaningful experimentation of interpersonal interactions.