7.1.5—Limits of marginal utility theory

The marginal-utility model is useful for explaining choice, but it simplifies preferences, information and measurement. Utility units are analytical devices, not directly observable physical quantities.

The model may assume stable preferences, rational choice, divisible goods, diminishing marginal utility and independence between goods. Complements, substitutes, habits, uncertainty and behavioural biases can weaken the simple prediction.

A collector may value a tenth item more than the first because of a set-completion effect, contradicting a strict diminishing pattern while leaving the model useful for other goods.

A model assumption is not an empirical law; use the theory to predict under stated conditions rather than treating every deviation as a calculation error.