Experienced Utility as a Standard of Policy Evaluation

Daniel Kahneman and Robert Sugden

Environmental & Resource Economics, 2005, vol. 32, issue 1, pages 161-181

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. Copyright Springer 2005

Keywords: contingent valuation; day reconstruction method; experienced utility; focusing illusion (search for similar items in EconPapers)
Date: 2005
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Persistent link: http://EconPapers.repec.org/RePEc:kap:enreec:v:32:y:2005:i:1:p:161-181

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