Logical Decisions - Classweb

The second parameter, local risk aversion (r) is a somewhat less
intuitive number. It is defined as the ratio r = -u''(x)/u'(x), where
u'(x) is the first derivative and u'(x) is the second derivative of the
utility function. In the case of the exponential utility functions
used in LDW this complicated function has a simple result. It is
-cx
equal to the constant c in the exponential formula u(x) = a +be .
If r is positive you are locally risk-averse (for measures where
higher levels are preferred). If r is negative, you are locally riskseeking.
Both of these parameters are displayed when you do an
assessment in LDW with the SUF::Assess Utility option.
Assessing SUFs with LDW. You assess SUFs in LDW with the
Assess::Common Units option. You must define SUFs over the
nominal utility range (usually from zero to one, with the least
preferred level of the measure assigned the utility zero and the
most preferred level assigned one).
Each measure starts with a straight line (linear) SUF. LDW
automatically returns a measure's SUF to a straight line if you
change its range. If you want to keep the default straight line
SUF, you can skip the SUF assessment process entirely for that
measure.
During the SUF assessment process, LDW lets you use the midlevel
splitting method or probability method to assess a point or
the SUF or one of its sub-ranges. You do this by selecting the
SUF::Assess Value or SUF::Assess Utility option. These options
will only be available when they are appropriate for the selected
active point. When you complete your assessment using one of
these options, LDW will update the current SUF to reflect the
assessed point.
Other options related to SUFs let you display SUF curves (the
Review::Common Units option) and formulas (the
Review::Weights::SUF Formulas option), and compute the utility
corresponding to a given level, or the level corresponding to a
given utility (the Review::Compute Utilities option). SUF
assessment is discussed further on page 7-6.
Computing Common Units With The Analytic Hierarchy
Process
The "Analytic Hierarchy Process" defines the utilities of a set of
alternatives by having you directly compare their performance on
an evaluation measure. You do this comparison intuitively,
without defining an explicit scale for the measure.
9-26 Section 9 -- In Depth