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Anomalies: Utility Maximization and Experienced Utility

Daniel Kahneman

Princeton University

Richard H. Thaler

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

December 1, 2005

The assumption that utility is always maximized allows often surprising inferences about the nature of the desires that guide people's ever-rational choices. This methodology has had many uses and undeniably has charm for economists, but it rests on the shaky foundation of an implausible and untestable assumption. In this paper we discuss a version of the utility maximization hypothesis that can be tested - and we find that it is false.

Number of Pages in PDF File: 28

Keywords: Utility Maximization, Experienced Utility, Behavioral Economics

JEL Classification: D01

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Date posted: December 16, 2005  

Suggested Citation

Kahneman, Daniel and Thaler, Richard H., Anomalies: Utility Maximization and Experienced Utility (December 1, 2005). Available at SSRN: http://ssrn.com/abstract=870494 or http://dx.doi.org/10.2139/ssrn.870494

Contact Information

Daniel Kahneman
Princeton University ( email )
Department of Psychology 3-2-1 Green Hall
Princeton, NJ 08544
United States
609-258-2280 (Phone)
609-258-2809 (Fax)
Richard H. Thaler (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5208 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  39
Citations:  30

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