Why Utility Non-Linearly Depends on Money: A Commonsense Explanation

Authors

Olga Kosheleva, The University of Texas at El PasoFollow
Vladik Kreinovich, The University of Texas at El PasoFollow
Mahdokhat Afravi, The University of Texas at El PasoFollow

Publication Date

10-2016

Comments

Technical Report: UTEP-CS-16-73

Published in Proceedings of the 4th International Conference on Mathematical and Computer Modeling, Omsk, Russia, November 11, 2016, pp. 13-18.

Abstract

Human decision making is based on the notion of utility. Empirical studies have shown that utility non-linearly depends on the money amount. In this paper, we provide a commonsense explanation of this empirical fact: namely, that without such non-linearity, we would not have a correct description of such a commonsense behavior as saving money for retirement.