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Experienced Utility as a Standard of Policy Evaluation

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  • Daniel Kahneman
  • Robert Sugden

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Abstract

This paper explores the possibility of basing economic appraisal on the measurement of experienced utility (utility as hedonic experience) rather than decision utility (utility as a representation of preference). Because of underestimation of the extent of hedonic adaptation to changed circumstances and because of the “focusing illusion” (exaggerating the importance of the current focus of one’s attention), individuals’ forecasts of experienced utility are subject to systematic error. Such errors induce preference anomalies which the experienced utility approach might circumvent. The “day reconstruction method” of measuring experienced utility is considered as a possible alternative to stated preference methods. Copyright Springer 2005

Suggested Citation

  • Daniel Kahneman & Robert Sugden, 2005. "Experienced Utility as a Standard of Policy Evaluation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(1), pages 161-181, September.
  • Handle: RePEc:kap:enreec:v:32:y:2005:i:1:p:161-181 DOI: 10.1007/s10640-005-6032-4
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