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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 Abstract: 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.
Keywords: Utility Maximization, Experienced Utility, Behavioral Economics JEL Classifications: D01 Working Paper SeriesDate posted: December 16, 2005 ; Last revised: March 10, 2006Suggested CitationContact Information
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