Constructing Separable Objective Functions
A separable objective function is approximately constructed from a few two-dimensional indifferences. The Hausdorff distance between the true and the approximate preference is estimated. With a counterexample it is shown that this estimate cannot be improved. The model is illustrated by constructing a separable objective function of German economic policy in four target variables: Inflation, Unemployment, GNP growth, and Increase in public debt.
Unable to display preview. Download preview PDF.
- 1.Debreu, G. (1960), Topological methods in cardinal utility theory. In: K. Arrow (Ed.). Mathematical methods in the social sciences, 1959, Stanford. Stanford University Press, 16–26.Google Scholar
- 2.Deutsche Bundesbank (1995), Monatsbericht, 47(8).Google Scholar
- 4.Kelley, J.L. (1955), General topology. Van Nostrand, London New York.Google Scholar
- 5.Shilov, G.E. (1973), Elementary Real and Complex Analysis. M.I.T. Press, Cambridge, Mass.Google Scholar
- 6.Tangian, A.S., and Gruber, J. (Eds.) (1997), Constructing Scalar-Valued Objective Functions. Springer, Berlin (Lecture Notes in Economics and Mathematical Systems 453).Google Scholar
- 7.Wakker, R. (1989), Additive Representations of Preferences: A New Foundation of Decision Analysis. Kluwer, Dordrecht.Google Scholar