Anomalies: Utility Maximization and Experienced Utility
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
Date posted: December 16, 2005
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