The evolution of decision and experienced utility
AbstractPsychologists 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Econometric Society in its journal Theoretical Economics.
Volume (Year): 6 (2011)
Issue (Month): 3 (September)
Contact details of provider:
Web page: http://econtheory.org
Evolution; decision utility; experienced utility; focusing illusion;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martin J. Osborne).
If references are entirely missing, you can add them using this form.