Professor of Decision Sciences
Targets are used quite often as a management tool, and it has been argued that thinking in terms of targets may be more natural than thinking in terms of utility. The standard expected-utility framework with a single attribute (such as money) and nondecreasing, bounded utility is equivalent to a target-oriented setting. A utility function, properly scaled, can be expressed as a cumulative distribution function (CDF) and related to the probability of meeting a target value.The authors consider whether the equivalence of the two approaches extends to the case of multiattribute utility. Our analysis shows that a multiattribute utility function cannot always be expressed in the form of a CDF and, furthermore, cannot always be expressed in the form of a target-oriented utility function. However, in each case, equivalence does hold for certain well-known classes of utility functions.In general, these results imply that although interpreting utility as a CDF and thinking about achieving targets works fine in the case of a single attribute, this approach should be used with caution in the multiattribute case, with CDF representations requiring more caution than target-oriented representations.