Average Utility Maximization: A Preference Foundation

Abstract

This paper provides necessary and sufficient preference conditions for average utility maximization over sequences of variable length. We obtain full generality by using a new algebraic technique that exploits the richness structure naturally provided by the variable length of the sequences. Thus we generalize many preceding results in the literature. For example, continuity in outcomes, a condition needed in other approaches, now is an option rather than a requirement. Applications to expected utility, decisions under ambiguity, welfare evaluations for variable population size, discounted utility, and quasilinear means in functional analysis are presented.

A Behavioral Foundation of Satiation and Habituation

“…The preference relation given on U(.) is standardized by a weak order (complete, transitive, and continuity, Note that Kothiyal et al [27] argue that the condition of continuity is not necessary for additive or average utility. A preference function represents if U(.)…”

An axiomatic approach to Markov decision processes

“…In the case of a positive discount rate, the well known preference foundation of Koopmans (1960Koopmans ( , 1972 is easily adapted to the present setting. The literature provides characterizations of two criteria for the no discounting case: the overtaking criterion (Asheim and Tungodden 2004;Basu and Mitra 2007;Brock 1970a) and the average reward criterion (Kothiyal et al 2014;Marinacci 1998;Khan and Stinchcombe 2018;Pivato 2022). The overtaking criterion is characterized by axioms that are similar to those in Sect.…”