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The evolution of decision and experienced utility

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Author Info

  • Robson, Arthur J.

    ()
    (Department of Economics, Simon Fraser University)

  • Samuelson, Larry

    ()
    (Department of Economics, Yale University)

Abstract

Psychologists report that people make choices on the basis of "decision utilities'' that routinely overestimate the "experienced utility'' consequences of these choices. This paper argues that this dichotomy between decision and experienced utilities may be the solution to an evolutionary design problem. We examine a setting in which evolution designs agents with utility functions that must mediate intertemporal choices, and in which there is an incentive to condition current utilities on the agent's previous experience. Anticipating future utility adjustments can distort intertemporal incentives, a conflict that is attenuated by separating decision and experienced utilities.

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File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20110311/5733/190
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Bibliographic Info

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 6 (2011)
Issue (Month): 3 (September)
Pages:

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Handle: RePEc:the:publsh:800

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Web page: http://econtheory.org

Related research

Keywords: Evolution; decision utility; experienced utility; focusing illusion;

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Cited by:
  1. Jakub Steiner (CERGE-EI and University of Edinburgh) & Colin Stewart (University of Toronto), 2014. "Perceiving Prospects Properly," ESE Discussion Papers 245, Edinburgh School of Economics, University of Edinburgh.

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