Utility Comparison and the Theory of Games

by Lloyd S. Shapley

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Considers interpersonal comparison of utility in game theory. A value theory useful for bargaining games requires that the utilities be measurable (cardinal); a mere ranking of preferences (ordinal utilities) is not adequate. This reflects reality, since the very nature of bargaining tests the bargainers' intensity: utility differences become comparable between persons, who must decide not only what they want but how badly they want it. The interpersonal utility comparisons that figure in negotiatory processes may aim at efficiency (maximization of total payoffs, social welfare) or at being equitable (sharing of social profit). An outcome is acceptable as the value of the game only if there exist scaling factors for the individual utilities under which the outcome is both equitable and efficient. (A preprint from the international colloquium, "La Decision: Agregation et Dynamique des Ordres de Preference," Aix-en-Provence, July 3-7, 1967.)

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