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Getting used to it: The adaptive global utility model

  • Bradford, W. David
  • Dolan, Paul

This paper expands the standard model of utility maximization to endogenize the ubiquitous phenomenon of adaptation. We assume that total utility is an aggregate function of the utility associated with different domains of life, with relative weights that are optimized according to the effort that the individual expends on producing utility in each domain. Comparative statics from the general maximization problem demonstrate that the traditional Slutsky equation should incorporate an additional response term to account for adaptation processes. Our adaptive global utility maximization model can be used to explain responses to changes in health.

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Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 29 (2010)
Issue (Month): 6 (December)
Pages: 811-820

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Handle: RePEc:eee:jhecon:v:29:y:2010:i:6:p:811-820
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505560

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  1. Paul Dolan & Daniel Kahneman, 2008. "Interpretations Of Utility And Their Implications For The Valuation Of Health," Economic Journal, Royal Economic Society, vol. 118(525), pages 215-234, 01.
  2. Bernard M. S. van Praag & P. Frijters & Ada Ferrer-i-Carbonell, 2001. "The Anatomy of Subjective Well-Being," Discussion Papers of DIW Berlin 265, DIW Berlin, German Institute for Economic Research.
  3. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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  7. K. K. Lancaster, 2010. "A New Approach to Consumer Theory," Levine's Working Paper Archive 1385, David K. Levine.
  8. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 729-58, August.
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  10. Daniel Kahneman & Richard H. Thaler, 2006. "Anomalies: Utility Maximization and Experienced Utility," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 221-234, Winter.
  11. Sprangers, Mirjam A. G. & Schwartz, Carolyn E., 1999. "Integrating response shift into health-related quality of life research: a theoretical model," Social Science & Medicine, Elsevier, vol. 48(11), pages 1507-1515, June.
  12. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
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  15. Frijters, Paul, 2000. "Do individuals try to maximize general satisfaction?," Journal of Economic Psychology, Elsevier, vol. 21(3), pages 281-304, June.
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