Utility function estimation: The entropy approach

Dionísio, A., A.H. Reis, L. Coelho (2008), "Utility function estimation: The entropy approach", Physica A, 385(15), 3862-3867.

The maximum entropy principle can be used to assign utility values when only partial information is available about the decision maker’s preferences. In order to obtain such utility values it is necessary to establish an analogy between probability and utility through the notion of a utility density function. In this paper we explore the maximum entropy principle to estimate the utility function of a risk averse decision maker.

Keywords: Maximum entropy; Utility functions; Preferences; Risk aversion