What is marginal utility?

Marginal utility is the additional benefit a person gets from consuming one more unit of a good. It usually declines with each unit, which is called diminishing marginal utility. This idea explains why people spread their spending across many goods instead of putting everything into one.

How it works

The first unit of a good satisfies the most urgent need and each later unit adds less. A buyer keeps buying while the marginal utility of the next unit is worth more than its price, and stops when the two are equal.

Across several goods, a rational buyer shifts money toward whichever offers the most additional benefit per unit of currency spent, until the ratios are equal. Prices and incomes change the point at which this happens. The same logic explains why discounts for bulk buying work only up to a point, and why people value water little in a city with a clean tap but dearly in a desert. The value of a unit depends on how many one already holds.

Example

Say the first slice of pizza gives a diner 10 points of satisfaction, the second 6, the third 3 and the fourth 1. If each slice costs the equivalent of 4 points to the diner, they buy two slices. If the price drops to the equivalent of 2 points, they buy three. A fourth slice is never worth buying at either price. Illustrative numbers only.

In a game economy, the tenth potion adds less value to a player than the first, so designers reduce potion prices at volume or add new goods to keep spending interesting.

How to model it in Machinations

Use a Register for the benefit of the next unit that falls as a Pool of owned units grows, linked by a State connection. Use a Gate or End condition that stops buying once the benefit drops below the price. Make the price a Lever, Play, and chart units bought.