Utility Theory
Utility theory is a foundational concept in economics, decision science, and game theory that models how individuals or agents make choices based on preferences and satisfaction. It quantifies the desirability or value of outcomes through a utility function, which assigns numerical values to represent preferences, enabling rational decision-making under uncertainty or risk. This theory underpins many applications in fields like artificial intelligence, finance, and behavioral science.
Developers should learn utility theory when building systems involving decision-making, optimization, or AI, such as in reinforcement learning, recommendation engines, or economic simulations. It provides a mathematical framework to model preferences and trade-offs, essential for creating algorithms that make rational choices, like in autonomous agents or resource allocation tools. Understanding utility theory helps in designing more effective and human-aligned systems in complex environments.