კონფერენცია

∘ Dali Magrakvelidze ∘
ANALYSIS OF CUSTOMER’S BEHAVIOR IN TERMS OF RISK BY UTILITY FUNCTION

Summary

When making a choice in terms of risk, the consumer will inevitably face the distribution of probability of purchasing different consumer baskets. If the customer has reasonable preferences according to consumption under different conditions, then we will use the utility to describe those preferences.

Generally, how a consumer assesses consumption in one situation relative to another depends on the actual probability of the given situation. For this reason, we present the utility function as a function that depends not only on the level of consumption but also on the probabilities.

To analyze choice under risk we can use almost all we can use almost all utility functions. As an example we took case of complete substrates. Here it is natural to evaluate each consumption according to its probability of occurrence. This gives us the following type of utility function:

Utility function can get the following convenient form:

This equation shows that the utility can be written as the sum of the product of consumption in each condition- Y(C₁) and Y(C₂) – and appropriately probabilities ∏₁ and ∏₂ .

If C₁, C₂ and C₃ denotes the corresponding consumption of the various conditions, and the probabilities of accessing all three of these states, then if the independence is satisfied, the benefit function should have the following form:

This is the function we call the expected benefit function.

Ivane Javakhishvili Tbilisi State University Paata Gugushvili Institute of Economics International Scientific C O N F E R E N C E S "ECONOMY – XXI CENTURY"

E ISSN 2587 - 4691	∘ Dali Magrakvelidze ∘ ANALYSIS OF CUSTOMER’S BEHAVIOR IN TERMS OF RISK BY UTILITY FUNCTION Summary When making a choice in terms of risk, the consumer will inevitably face the distribution of probability of purchasing different consumer baskets. If the customer has reasonable preferences according to consumption under different conditions, then we will use the utility to describe those preferences. Generally, how a consumer assesses consumption in one situation relative to another depends on the actual probability of the given situation. For this reason, we present the utility function as a function that depends not only on the level of consumption but also on the probabilities. To analyze choice under risk we can use almost all we can use almost all utility functions. As an example we took case of complete substrates. Here it is natural to evaluate each consumption according to its probability of occurrence. This gives us the following type of utility function: Utility function can get the following convenient form: This equation shows that the utility can be written as the sum of the product of consumption in each condition- Y(C₁) and Y(C₂) – and appropriately probabilities ∏₁ and ∏₂ . If C₁, C₂ and C₃ denotes the corresponding consumption of the various conditions, and the probabilities of accessing all three of these states, then if the independence is satisfied, the benefit function should have the following form: This is the function we call the expected benefit function.