Saturday 7 May 2016

A relative utility function


A utility function, especially when applying the function to a game theory model, should be in a relative term. When we believe people surrounding us have much better happier than us, by ignoring their own preference functions and applying their holdings to our own preference function, our happiness will be lower even if the absolute term is be not very bad. Therefore, in the game theory, sometimes we may accept a lower return as long as we can make ourselves better than other players. Such phenomenon may not always happen; however, it does sometimes exist.

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