A system for optimizing of private house owner's spending and benefits

Investment decisions about privately-owned houses are usually based on limited investment budget and vague information about choice alternatives available. Since a household buying a dwelling has to compare the housing expenditure with other expenditures, the financial consequences of the housing investment should be transformed on an annual basis. Furthermore, to be able to make a choice out of various choice alternatives within the annual housing budget, the annual costs of the most important attributes have to be calculated separately. Cost information about the choice alternatives should be used in combination with their utility in order to be able to allocate the household’s budget. The cost information is objective while utility depends on an individual household. As a consequence, the household should determine its own utility scale. This is accomplished by defining a willingness to pay amount for each choice alternative using a bidding game. The willingness to pay amount reveals the maximum additional amount of money the household is willing to pay for an additional quantity or quality of a certain attribute. In order to maximise the total utility within the budget, the ratios of marginal utility to marginal cost for the attributes have to be compared. The definition of subjective utilities as willingness to pay amounts has drawbacks. Future research should improve the system as concerns utility measurement for the decision support of individual households.