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Explaining heterogeneity in utility functions by individual differences in preferred decision modes

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Author Info
Schunk, Daniel () (Sonderforschungsbereich 504)
Betsch, Cornelia () (Sonderforschungsbereich 504)

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Abstract

The 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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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 04-26.

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Length: 25 pages
Date of creation: 19 Jul 2004
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Handle: RePEc:xrs:sfbmaa:04-26

Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  2. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June. [Downloadable!] (restricted)
  3. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  4. Schunk, Daniel & Winter, Joachim, 2004. "The Relationship Between Risk Attitudes and Heuristics in Search Tasks: A Laboratory Experiment," Sonderforschungsbereich 504 Publications 04-23, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lothar Essig, 2005. "Precautionary saving and old-age provisions: Do subjective saving motive measures work?," MEA discussion paper series 05084, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
  2. Lothar Essig, 2005. "Household Saving in Germany: Results from SAVE 2001-2003," MEA discussion paper series 05083, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
  3. Essig, Lothar, 2004. "Household Saving in Germany:," Sonderforschungsbereich 504 Publications 05-23, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
  4. Lothar Essig, 2005. "Household Saving in Germany: Results from SAVE 2001-2003," MEA discussion paper series 05083, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
  5. Lothar Essig, 2005. "Precautionary saving and old-age provisions: Do subjective saving motive measures work?," MEA discussion paper series 05084, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
  6. Essig, Lothar, 2004. "Precautionary saving and old-age provisions: Do subjective saving motives measures work?," Sonderforschungsbereich 504 Publications 05-22, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
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