28 Pages Posted: 24 Jul 2006
Date Written: October 2006
We study the dissociation between two common measures of value - monetary assessment of purchase options versus the predicted utility associated with owning or consuming those options, a disparity that is reflected in well-known judgment anomalies and is important for interpreting market research data. We propose that a significant cause of this dissociation is the difference in how these two types of evaluations are formed - each is informed by different types of information. Thus, dissociation between these two types of measures is not caused by failure to map utility onto money, since such mapping is not really attempted. Specifically, we suggest that monetary assessment tends to focus on the transaction in which the purchase alternative would be acquired or forgone (e.g., how fair the transaction seems), failing to adequately reflect the purchase alternative itself (e.g., the pleasure of consuming it), which is what informs predicted utility judgments. We illustrate the value of this idea by deriving and testing empirical predictions of disparities in impact of different types of information and manipulations on the two types of assessment.
Keywords: Decision-Making, Buyer Behavior, Market Research
JEL Classification: D11, D46, J3, M3
Suggested Citation: Suggested Citation
Amir, On and Ariely, Dan and Carmon, Ziv, The Dissociation between Monetary Assessments and Predicted Utility (October 2006). Available at SSRN: https://ssrn.com/abstract=918260 or http://dx.doi.org/10.2139/ssrn.918260