On the Use of Utility Theory in Engineering Design

Multiattribute utility theory has a long history of application in engineering and systems design. These applications rely almost exclusively on two types of utility functions: the additive and multiplicative forms. The foundations of utility theory, however, do not place restrictions on the functional form of the utility function, meaning that many methods of representing preferences remain unexplored in systems design. This paper reviews the literature on applications of utility theory in design to bring light to potential new directions for research and to clarify a few subtle misapplications of utility theory. These misuses include the failure to distinguish between direct and indirect value attributes, the use of probability as an attribute, treating costs from different sources differently, and restricting the functional form of utility. This paper introduces a value-based approach that is based on the creation of a deterministic value function for design and the assignment of a 1-D utility function over the value measure. We use a conceptual and numeric example to illustrate the greater flexibility of this approach. We also present the concept of utility transversality in engineering design. We show that several criticisms of utility theory that have appeared in the engineering design literature are actually criticisms of these artificial limitations and that these limitations are overcome by the value-based approach.