When is More Better? On the Relationship between Magnitude and Subjective Value

Abstract

We examine three determinants of the relationship between the magnitude of a stimulus and a person's subjective value of the stimulus: the process by which value is assessed (either by feeling or by calculation),the evaluability of the relevantmagnitude variable (whether the desirability of a given level of that variable can be evaluated independently), and the mode of evaluation(whether stimuli are encountered and evaluated jointly or separately). Reliance on feeling, lack of evaluability, and single evaluation lead to insensitivity to magnitude. An analysis invoking these factors provides a novel account for why people typically become less sensitive to changes in the magnitude of a stimulus as the magnitude increases.

Keywords: utility function, prospect theory, evaluability, scope-insensitivity, experienced utility, joint evaluation, separate evaluation

JEL Classification: D81, D11, D12, D91