Design Theory and Methods using CAD/CAE

2.4. Utility Theory

In Sections 2.3.3 and 2.3.4, we used an expected value rule to support decision making under risk and uncertainty. In many situations, it is highly desired that a decision maker's preference is incorporated. Utility theory offers rigorous mathematical framework, within which we are able to examine the preferences of individuals and incorporate them into decision making. In this section, we discuss utility theory from a design perspective. We discuss basics of the theory, including assumptions that lead to axioms of the theory, the utility functions that capture an individual's attitude toward risk, and the construction of utility functions for single and multiple attributes. In the context of design, the attributes are design ...