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Utility maximization
 

 

The method of modelling choice by assuming that an individual’s preferences can be represented by a utility function which they seek to maximize. Where choices have to be made under conditions of risk the objective becomes that of maximizing expected utility. Utility maximization can be used to model individual consumers, organizations, and by replacing the widespread applicability throughout economics and has been the basis of the formalization of the theory of choice.

Reference: Oxford Press Dictonary of Economics, 5th edt.