Experienced Utility versus Decision Utility: Putting the 'S' in Satisfaction

Steven Carter (sjcarter@uci.edu) and Michael McBride (mcbride@uci.edu)
Additional contact information
Steven Carter: Department of Economics, University of California-Irvine

No 80925, Working Papers from University of California-Irvine, Department of Economics

Abstract: Recent research distinguishes an individual's decision utility, inferred from her observed choices, from her experienced utility, which more closely matches the notion of happiness. Using various estimation techniques with a unique experimental data set, we test whether post-choice satisfaction (experienced utility), like decision utility, is S-shaped with loss aversion around a given reference point. We also present a model which estimates the satisfaction function and reference point simultaneously. When pooling the data across individuals, we find an S-shaped satisfaction function in which the reference point depends on past payments, social comparisons, and subjective expectations. There is mixed evidence of loss aversion. At the individual level, there is substantial variation in satisfaction function shapes, although the S-shape is common. Though the two notions of utility are distinct, our findings imply that the two are related at a fundamental level.

Keywords: Happiness; Utility; Experiment; Value function; Prospect theory (search for similar items in EconPapers)
JEL-codes: C91 D70 I30 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2009-06
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-hap and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.economics.uci.edu/files/docs/workingpapers/2008-09/mcbride-25.pdf (application/pdf)

Related works:
Journal Article: Experienced utility versus decision utility: Putting the ‘S’ in satisfaction (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:irv:wpaper:080925

Access Statistics for this paper

More papers in Working Papers from University of California-Irvine, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Melissa Valdez (econ@uci.edu).