Explaining heterogeneity in utility functions by individual differences in preferred decision modes
AbstractThe curvature of utility functions varies between people. We suggest that there exists a relationship between the mode in which a person usually makes a decision and the curvature of the individual utility function. In a deliberate decision mode, a decision-maker tends to have a nearly linear utility function. In an intuitive decision mode, the utility function is more curved. In our experiment the utility function is assessed with a lottery-based utility elicitation method and related to a measure that assesses the habitual preference for intuition and deliberation (Betsch, submitted). Results confirm that for people that habitually use the deliberate decision mode, the utility function is more linear than for people that habitually use the intuitive decision mode. The finding and its implications for the research on individual decision behavior in economics and psychology are discussed.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 04-26.
Length: 25 pages
Date of creation: 19 Jul 2004
Date of revision:
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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- Lothar Essig, 2005. "Precautionary saving and old-age provisions: Do subjective saving motive measures work?," MEA discussion paper series 05084, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
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