What Are People's Actual Utility Functions in Budget Aggregation?

TL;DR

This paper empirically investigates human utility functions in budget aggregation, revealing that standard models poorly fit actual preferences and highlighting the need for more flexible utility representations.

Contribution

It introduces an open-source framework for testing utility functions through pairwise comparisons and provides empirical evidence challenging traditional models.

Findings

Standard utility models like $\,ell_1$, $\,ell_2$, and Leontief poorly fit human preferences.

Participants exhibit complex, multi-dimensional, and asymmetric preferences.

Most participants show asymmetries with respect to gains and issues, contradicting simple utility assumptions.

Abstract

Budget aggregation is a process in which citizens vote by declaring their individual ideal budget allocation, and a pre-determined rule aggregates all votes into a single outcome. Recent theoretical work has proposed various aggregation rules, along with impossibility results for satisfying desirable axioms simultaneously. These analyses rely on assumptions about how voters evaluate non-ideal allocations, yet such assumptions have not been empirically validated on human subjects. We present a framework for empirically testing hypotheses about human utility functions using simple pairwise comparisons. We introduce a modular, open-source polling system that, after eliciting a subject's ideal allocation, presents carefully generated pairs of non-ideal alternatives. Different pair-generation algorithms allow testing various properties of utility functions. Using this framework, we conduct polls with hundreds of participants. The results show that standard utility models, including $\ell_1$, $\ell_2$, and Leontief, fail to capture human preferences, as very few participants behave consistently with any single model. In contrast, we find strong empirical support for more general properties, such as star-shaped, multi-dimensional single-peaked, and peak-linear preferences. We also find that most participants exhibit asymmetries both with respect to sign (gains vs. losses) and issue, contradicting any utility model based on an $\ell_p$ metric. These findings suggest that developing practical budget-aggregation mechanisms requires more flexible models of human utility functions.