Utility Maximization Analysis of an Organization: A Mathematical Economic Procedure

Mohajan, Devajit and Mohajan, Haradhan (2022): Utility Maximization Analysis of an Organization: A Mathematical Economic Procedure. Published in: Law and Economy , Vol. 3, No. 1 (26 December 2022): pp. 1-15.

Abstract

In the society utility is the vital concept, especially in mathematical economics. It is considered as the tendency of an object or action that increases or decreases overall happiness. In social sciences, the property of a commodity that enables to satisfy human wants is called utility. This paper has tried to operate utility maximization policy of an organization by considering two constraints: budget constraint and coupon constraint. To develop the maximization policy of utility function, the techniques of multivariate calculus are used. In this study four commodity variables are used to operate the mathematical analysis efficiently. In this article Lagrange multiplier technique is applied to achieve optimal result throughout the study.

• Item Type: MPRA Paper
• Language: English
• Keywords: Commodities, Lagrange multipliers, utility maximization, budget and coupon constraints
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C67 - Input-Output Models; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I31 - General Welfare, Well-Being; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development

References

Alvino, L., Constantinides, E., & Franco, M. (2018). Towards a Better Understanding of Consumer Behavior: Marginal Utility as a Parameter in Neuromarketing Research. International Journal of Marketing Studies, 10(1), 90-106.

Baxley, J. V., & Moorhouse, J. C. (1984). Lagrange Multiplier Problems in Economics. The American Mathematical Monthly, 91(7), 404-412.

Bentham, J. (1780). An Introduction to the Principles of Morals and Legislation. CreateSpace Independent Publishing Platform.

Castro, L. C., & Araujo, A. S. (2019). Marginal Utility and its Diminishing Methods. International Journal of Tax Economics and Management, 2(6), 36-47.

Dominick, S. (2008). Principles of Microeconomics. Oxford University Press, New Delhi.

Eaton, B., & Lipsey, R. (1975). The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition. Review of Economic Studies, 42(1), 27-49.

Fishburn, P. C. (1970). Utility Theory for Decision Making. Huntington, NY: Robert E. Krieger.

Galiani, F. (1751). Della Moneta. Reprinted in: Collezioni Custodi Scrittori Classici Italiani di Economia Politica, 10.

Gauthier, D. (1975). Reason and Maximization. Canadian Journal of Philosophy, 4(3), 411-433.

Islam, J. N., Mohajan, H. K., & Moolio, P. (2009a). Preference of Social Choice in Mathematical Economics. Indus Journal of Management & Social Sciences, 3(1), 17-38.

Islam, J. N., Mohajan, H. K., & Moolio, P. (2009b). Political Economy and Social Welfare with Voting Procedure. KASBIT Business Journal, 2(1), 42-66.

Islam, J. N., Mohajan, H. K., & Moolio, P. (2010). Utility Maximization Subject to Multiple Constraints. Indus Journal of Management & Social Sciences, 4(1), 15-29.

Islam, J. N., Mohajan, H. K., & Moolio, P. (2011). Output Maximization Subject to a Nonlinear Constraint. KASBIT Business Journal, 4(1), 116-128.

Kirsh, Y. (2017). Utility and Happiness in a Prosperous Society. Working Paper Series, No. 37-2017, Institute for Policy Analysis, The Open University of Israel.

Kothari, C. R. (2008). Research Methodology: Methods and Techniques (2nd Ed.). New Delhi: New Age International (P) Ltd.

Lin, C.-C., & Peng, S.-S. (2019). The Role of Diminishing Marginal Utility in the Ordinal and Cardinal Utility Theories. Australian Economic Papers, 58(3), 233-246.

Mas-Colell, A., Whinston, M.D., & Green, J. R. (1995). Microeconomic Theory. Oxford University Press, Oxford.

Mohajan, D., & Mohajan, H. K. (2022a). Profit Maximization Strategy in an Industry: A Sustainable Procedure. Law and Economy, 1(3), 17-43. https://doi:10.56397/LE.2022.10.02

Mohajan, D. & Mohajan, H. K. (2022b). Sensitivity Analysis among Commodities and Coupons during Utility Maximization. Frontiers in Management Science, 1(3), 13-28.

Mohajan, D., & Mohajan, H. K. (2022c). Importance of Total Coupon in Utility Maximization: A Sensitivity Analysis. Law and Economy, 1(5), 65-67.

Mohajan, D., & Mohajan, H. K. (2022d). Utility Maximization Investigation: A Bordered Hessian Method. Annals of Spiru Haret University. Economic Series, Manuscript Submitted.

Mohajan, D. & Mohajan, H. K. (2022e). Sensitivity Analysis among Commodities and Prices: Utility Maximization Perspectives (Unpublished Manuscript).

Mohajan, D., & Mohajan, H. K. (2022f). Effect of Various Inputs When Budget of an Organization Increases: A Profit Maximization Study. Noble Academic Publisher, Manuscript Submitted.

Mohajan, H. K. (2017a). Optimization Models in Mathematical Economics. Journal of Scientific Achievements, 2(5), 30-42.

Mohajan, H. K. (2017b). Two Criteria for Good Measurements in Research: Validity and Reliability. Annals of Spiru Haret University. Economic Series, 17(3), 58-82.

Mohajan, H. K. (2018). Qualitative Research Methodology in Social Sciences and Related Subjects. Journal of Economic Development, Environment and People, 7(1), 23-48.

Mohajan, H. K. (2020). Quantitative Research: A Successful Investigation in Natural and Social Sciences. Journal of Economic Development, Environment and People, 9(4), 52-79.

Mohajan, H. K. (2021a). Utility Maximization of Bangladeshi Consumers within Their Budget: A Mathematical Procedure. Journal of Economic Development, Environment and People, 10(3), 60-85.

Mohajan, H. K. (2021b). Product Maximization Techniques of a Factory of Bangladesh: A Sustainable Procedure. American Journal of Economics, Finance and Management, 5(2), 23-44.

Mohajan, H. K. (2021c). Estimation of Cost Minimization of Garments Sector by Cobb-Douglass Production Function: Bangladesh Perspective. Annals of Spiru Haret University. Economic Series, 21(2), 267-299.

Mohajan, H. K. (2022a). Four Waves of Feminism: A Blessing for Global Humanity. Studies in Social Science & Humanities, 1(2), 1-8. https://doi:10.56397/SSSH.2022.09.01

Mohajan, H. K. (2022b). An Overview on the Feminism and Its Categories. Research and Advances in Education, 1(3), 11-26. https://doi.org/10.56397/RAE.2022.09.02

Mohajan, H. K., Islam, J. N., & Moolio, P. (2013). Optimization and Social Welfare in Economics. Lambert Academic Publishing, Germany.

Moolio, P., Islam, J. N., & Mohajan, H. K. (2009). Output Maximization of an Agency. Indus Journal of Management and Social Sciences, 3(1), 39-51.

Moscati, J. (2013). Were Jevons, Menger and Walras Really Cardinalists? On the Notion of Measurement in Utility Theory, Psychology, Mathematics and other Disciplines, 1870-1910. History of Political Economy, 45(3), 373-414.

Pareto, V. (1906). Manuale di Economia Politica, con una Introduzione alla Scienza Sociale. Societa Editrice Libraria, Milano.

Polit, D. F., & Hungler, B. P. (2013). Essentials of Nursing Research: Methods, Appraisal, and Utilization (8th Ed.). Philadelphia: Wolters Kluwer/Lippincott Williams and Wilkins.

Read, D. (2004). Utility Theory from Jeremy Bentham to Daniel Kahneman. Working Paper No. LSEOR 04-64, London School of Economics and Political Science.

Roy, L., Molla, R., & Mohajan, H. K. (2021). Cost Minimization is Essential for the Sustainable Development of an Industry: A Mathematical Economic Model Approach. Annals of Spiru Haret University. Economic Series, 21(1), 37-69.

Samuelson, P. A. (1947). Foundations of Economic Analysis. Harvard University Press, Cambridge, MA.

Stigler, G. J. (1950). The Development of Utility Theory. I. Journal of Political Economy, 58(4), 307-327.

Strotz, R. (1953). Cardinal Utility. American Economic Review, 43(2), 384-397.

Zhao, Q., Zhang, Y., & Friedman, D. (2017). Multi-Product Utility Maximization for Economic Recommendation. WSDM, 435-443.