| Abstract: | This paper is concerned with a method for the assessment of utility functions of multi-numeraire consequences. It is proven that given von Neumann and Morgenstern's axioms of “rational behavior” and two additional assumptions, the utility function for (x, y) consequences can be written as U(x, y) = Ux(x) + Uy(y) + KUx(x) Uy(y). K is a constant that must be evaluated empirically. This form shall be designated as a quasi-separable utility function. It is more general than the separable utility function and is shown to be nearly as easy to use. Implications and ramifications of such a utility function and its requisite assumptions are discussed. A technique for practical application of this work is presented. |
