New Methods of Modelling and Estimating the Utility Function

Book excerpt: We introduce a novel and convenient approach to utility modeling. In doing so, we present a general utility function in a very simple exact form. Furthermore, we develop a method to (accurately) measure preferences without any utility data. We also devise a method to measure the marginal utility. Moreover, we express the price as an explicit and simple function of the cost. We also show the impact of the input price on output price. Then we develop new methods of modeling and measuring the consumer utility. In so doing, we overcome a major obstacle: the curse of the dimensionality. In addition, we introduce new methods of modelling and measuring the consumer demand for the firm's good.