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Determinants of Experienced Utility: Laws and Implications

Manel Baucells () and Rakesh K. Sarin ()
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Rakesh K. Sarin: Decisions, Operations and Technology Management Area, UCLA Anderson School of Management, University of California, Los Angeles, California 90095

Decision Analysis, 2013, vol. 10, issue 2, 135-151

Abstract: Satisfaction in experiencing the future depends on decisions made today. We consider six well-known psychological laws governing satisfaction. The laws capture habit formation and satiation. We show it is possible to formalize these laws by means of a utility model and to derive implications from the laws: wanting versus liking, crescendo, recharge periods, variety seeking, and craving. The discussion combines mathematical propositions, experimental findings in psychology, and time-honored wisdom. We discuss how the sixth law---projection bias---may lead to incorrect predictions of experienced utility and suboptimal life-balance choices.

Keywords: experienced utility; time and budget allocation; habit formation; satiation; variety seeking; craving; projection bias (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:inm:ordeca:v:10:y:2013:i:2:p:135-151