Ordinal utility and economic price indices
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In economic price index theory, a reference level of utility is needed for measuring the change in the cost of living oetween a base period and a comparison period. A reference level function can be used to derive this reference utility level from the utilities attained at the base and at the comparison prices. Depending on the scale type of the underlying utility function, the reference level function has to satisfy certain invariance conditions. In this paper, these conditions are formulated as functional equations for interval scales and for ordinal utility scales. By solving these equations, we characterize the class of admissible reference level functions for the respective scale type.
AMS (1991) subject classificationPrimary 39B40 Secondary 90A10
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