Concept of Utility Theory | Report

Running Head: SUPPLY CHAIN AND LOGISTICS MANAGEMENT
Supply Chain and Logistics Management
Name of the Student:
Name of the University:
Author Note:

SUPPLY CHAIN AND LOGISTICS MANAGEMENT1
Utility theory
Utility theory under all aspects generally bases its theoretical beliefs upon the
preferences which are associated with the individuals. It is considered to be a theoretical part
assumed in economics in order to explain behavioral part associated with the individuals based
upon the premise which people can reliably create a rank order on their choices which are
dependent upon the preferences related to them (Denoeux & Shenoy, 2019). Under this
respective part, it is understandable that each individual generally showcases different mode of
preferences which basically appears to be much hard-wired within every individual.
Thus, under this respective part it can be stated that several preferences which are
related to the individuals are completely on an intrinsic basis. Some of the major
assumptions of utility theory are mentioned below:
Completeness: Individuals under all aspects can easily rank order every possible bundle. In this
respective part the theory clearly assumes that, no matter how much consumptions bundles
of different combinations are placed beside the individual, every individual can rank them on
the basis of their preferences.
Thus, it is understandable that individuals are liable to compare any available bundle
with compared to other bundles and can easily rank them on the basis of their satisfaction
level provided by the bundles.
Mix-is-better: Suppose a particular individual is completely indifferent with choice among
clothing of one week and same as compared to food (Moscati, 2016). Thus, either under this
respective part choice made by itself is generally not preferred on the other. The “mix-is-better”
part assumption regarding the preferences states that mix made out of two, we can say half