Experienced Utility as a Standard of Policy Evaluation |
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Authors: | Daniel?Kahneman Email author" target="_blank">Robert?SugdenEmail author |
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Institution: | (1) Woodrow Wilson School of Public and International Affairs, Princeton University, Princeton, NJ 08544-1013, USA;(2) School of Economics, University of East Anglia, NR4 7TJ Norwich, UK |
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Abstract: | This paper explores the possibility of basing economic appraisal on the measurement of experienced utility (utility as hedonic
experience) rather than decision utility (utility as a representation of preference). Because of underestimation of the extent
of hedonic adaptation to changed circumstances and because of the “focusing illusion” (exaggerating the importance of the
current focus of one’s attention), individuals’ forecasts of experienced utility are subject to systematic error. Such errors
induce preference anomalies which the experienced utility approach might circumvent. The “day reconstruction method” of measuring
experienced utility is considered as a possible alternative to stated preference methods.
JEL classifications: D63, Q51 |
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Keywords: | contingent valuation day reconstruction method experienced utility focusing illusion |
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