Crossutility

Crossutility is a concept found in decision theory and welfare economics that describes a framework for evaluating choices by accounting for interactions among multiple criteria that contribute to overall satisfaction.

Unlike standard utility models that assume separable, independent preferences across criteria, crossutility introduces a cross-utility function that captures how the marginal value of one criterion depends on the levels of others. A common representation is CU(x1,...,xk) = sum_i u_i(x_i) + sum_{i<j} v_{ij}(x_i, x_j) + ..., where u_i are baseline utilities and v_{ij} are interaction terms reflecting synergy or trade-offs.

Applications include multi-criteria decision analysis, policy evaluation, product design, and algorithmic decision making, where decision outcomes depend on several interrelated factors such as price, quality, risk, environmental impact, or social welfare. Crossutility can help compare allocations that are not comparable under a single criterion and can reveal non-additive effects that standard utility models miss.

Terminology and formalization vary across disciplines; crossutility is not a single standardized concept and may be described under different names, such as cross-criteria utility, interaction effects in utility theory, or multi-criteria utility models. Practical use requires careful specification and empirical estimation, with concerns about identifiability, data requirements, and interpretability.

See also: multi-criteria decision analysis, utility theory, interaction effects, conjoint analysis.