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Anomalies: Utility Maximization and Experienced Utility

28 Pages Posted: 16 Dec 2005  

Daniel Kahneman

Princeton University

Richard H. Thaler

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

Date Written: 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 Classification: D01

Suggested Citation

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

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)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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)

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