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http://ssrn.com/abstract=1279425
 
 

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The Evolution of Decision and Experienced Utilities


Arthur J. Robson


Simon Fraser University (SFU) - Department of Economics

Larry Samuelson


Yale University

February 15, 2010

Cowles Foundation Discussion Paper No. 1678

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.

Number of Pages in PDF File: 30

Keywords: Discounting, Evolution, Present bias, Time preference

JEL Classification: D1, D9

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Date posted: October 6, 2008 ; Last revised: February 17, 2010

Suggested Citation

Robson, Arthur J. and Samuelson, Larry, The Evolution of Decision and Experienced Utilities (February 15, 2010). Cowles Foundation Discussion Paper No. 1678. Available at SSRN: http://ssrn.com/abstract=1279425

Contact Information

Arthur J. Robson
Simon Fraser University (SFU) - Department of Economics ( email )
8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada
Larry Samuelson (Contact Author)
Yale University ( email )
30 Hillhouse Avenue
New Haven, CT 06520-8281
United States
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