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The evolution of decision and experienced utility

Author

Listed:
  • Robson, Arthur J.

    () (Department of Economics, Simon Fraser University)

  • Samuelson, Larry

    () (Department of Economics, Yale University)

Abstract

Psychologists report that people make choices on the basis of "decision utilities'' that routinely overestimate the "experienced utility'' consequences of these choices. This paper argues that this dichotomy between decision and experienced utilities may be the solution to an evolutionary design problem. We examine a setting in which evolution designs agents with utility functions that must mediate intertemporal choices, and in which there is an incentive to condition current utilities on the agent's previous experience. Anticipating future utility adjustments can distort intertemporal incentives, a conflict that is attenuated by separating decision and experienced utilities.

Suggested Citation

  • Robson, Arthur J. & Samuelson, Larry, 2011. "The evolution of decision and experienced utility," Theoretical Economics, Econometric Society, vol. 6(3), September.
  • Handle: RePEc:the:publsh:800
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    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20110311/5733/190
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    Cited by:

    1. Ingela Alger & Donald Cox, 2013. "The evolution of altruistic preferences: mothers versus fathers," Review of Economics of the Household, Springer, vol. 11(3), pages 421-446, September.
    2. Bruno Frey & Alois Stutzer, 2014. "Economic Consequences of Mispredicting Utility," Journal of Happiness Studies, Springer, vol. 15(4), pages 937-956, August.
    3. Jakub Steiner & Colin Stewart, 2016. "Perceiving Prospects Properly," American Economic Review, American Economic Association, vol. 106(7), pages 1601-1631, July.
    4. Alger, Ingela & Lehmann, Laurent & Weibull, Jörgen W., 2018. "Uninvadable social behaviors and preferences in group-structured populations," TSE Working Papers 18-888, Toulouse School of Economics (TSE).
    5. Heutel, Garth, 2015. "Optimal policy instruments for externality-producing durable goods under present bias," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 54-70.
    6. Steiner, Jakub & Stewart, Colin, 2014. "Perceiving Prospects Properly," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-39, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    More about this item

    Keywords

    Evolution; decision utility; experienced utility; focusing illusion;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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