IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

The triumph of hope over disappointment: A note on the utility value of good health expectations

  • Foster, Gigi
  • Frijters, Paul
  • Johnston, David W.

In this paper, we present and test the empirical implications of competing theories about how expectations of outcomes affect utility. In the first utility formulation, which is consistent with particular interpretations of disappointment, prospect theory and regret theory, individuals receive negative utility from outcomes that were worse than expected. This directly implies that expectations themselves enter utility negatively. The second utility formulation incorporates anticipatory savoring, where positive expectations about the future directly lead to more utility today. We test which of these formulations best explains actual connections between health and welfare over time, using data from the Household Income and Labour Dynamics in Australia survey. Estimated coefficients from fixed-effects ordered logit models support a strong positive utility impact of positive expectations: expecting good health in the future increases happiness now. Our results are one argument for benevolent health care providers to allow individuals to maintain unrealistically positive expectations about the future.

If 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.

File URL: http://www.sciencedirect.com/science/article/pii/S0167487011001565
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Economic Psychology.

Volume (Year): 33 (2012)
Issue (Month): 1 ()
Pages: 206-214

as
in new window

Handle: RePEc:eee:joepsy:v:33:y:2012:i:1:p:206-214
Contact details of provider: Web page: http://www.elsevier.com/locate/joep

References listed on IDEAS
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.:

as in new window
  1. Markus K. Brunnermeier & Jonathan A. Parker, 2002. "Optimal expectations," LSE Research Online Documents on Economics 24954, London School of Economics and Political Science, LSE Library.
  2. Frijters, Paul & Liu, Amy Y.C. & Meng, Xin, 2012. "Are optimistic expectations keeping the Chinese happy?," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 159-171.
  3. Senik, Claudia, 2006. "Is Man Doomed to Progress?," IZA Discussion Papers 2237, Institute for the Study of Labor (IZA).
  4. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles," Post-Print halshs-00754299, HAL.
  5. Dhami, Sanjit & al-Nowaihi, Ali, 2007. "Why do people pay taxes? Prospect theory versus expected utility theory," Journal of Economic Behavior & Organization, Elsevier, vol. 64(1), pages 171-192, September.
  6. Nicole Watson & Mark Wooden, 2004. "The HILDA Survey Four Years On," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(3), pages 343-349, 09.
  7. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-24, December.
  8. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
  9. Andrew Caplin & John Leahy, 2001. "Psychological Expected Utility Theory and Anticipatory Feelings," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 55-79.
  10. Christian Gollier & Alexander Muermann, 2010. "Optimal Choice and Beliefs with Ex Ante Savoring and Ex Post Disappointment," Management Science, INFORMS, vol. 56(8), pages 1272-1284, August.
  11. Botond Koszegi & Matthew Rabin, 2009. "Reference-Dependent Consumption Plans," American Economic Review, American Economic Association, vol. 99(3), pages 909-36, June.
  12. John A. List, 2004. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," Econometrica, Econometric Society, vol. 72(2), pages 615-625, 03.
  13. Loewenstein, George, 1987. "Anticipation and the Valuation of Delayed Consumption," Economic Journal, Royal Economic Society, vol. 97(387), pages 666-84, September.
  14. Lixin Cai & Guyonne Kalb, 2006. "Health status and labour force participation: evidence from Australia," Health Economics, John Wiley & Sons, Ltd., vol. 15(3), pages 241-261.
  15. Botond Koszegi & Matthew Rabin, 2005. "A Model of Reference-Dependent Preferences," Levine's Bibliography 784828000000000341, UCLA Department of Economics.
  16. Alex Michalos & Bruno Zumbo & Anita Hubley, 2000. "Health and the Quality of Life," Social Indicators Research- An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 51(3), pages 245-286, September.
  17. Gul, Faruk, 1991. "A Theory of Disappointment Aversion," Econometrica, Econometric Society, vol. 59(3), pages 667-86, May.
  18. Leslie I. Boden & Monica Galizzi, 2003. "Income Losses of Women and Men Injured at Work," Journal of Human Resources, University of Wisconsin Press, vol. 38(3).
  19. Caplin, A. & Leahy, J., 1999. "The Supply of Information by a Concerned Expert," Working Papers 99-08, C.V. Starr Center for Applied Economics, New York University.
  20. Koszegi, Botond & Rabin, Matthew, 2008. "Choices, situations, and happiness," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1821-1832, August.
  21. Groot, Wim, 2000. "Adaptation and scale of reference bias in self-assessments of quality of life," Journal of Health Economics, Elsevier, vol. 19(3), pages 403-420, May.
  22. Koszegi, Botond, 2003. "Health anxiety and patient behavior," Journal of Health Economics, Elsevier, vol. 22(6), pages 1073-1084, November.
  23. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:joepsy:v:33:y:2012:i:1:p:206-214. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.