Is There One Unifying Concept of Utility?An Experimental Comparison of Utility Under Risk and Utility Over Time

Mohammed Abdellaoui, Han Bleichrodt, Olivier L'Haridon and Corina Paraschiv ()
Additional contact information
Corina Paraschiv: GREGHEC, 78351 Jouy en Josas, France; and University Paris Descartes, 75016 Paris, France

Management Science, 2013, vol. 59, issue 9, 2153-2169

Abstract: The nature of utility is controversial. Whereas decision theory commonly assumes that utility is context specific, applied and empirical decision analysis typically assumes one unifying concept of utility applicable to all decision problems. This controversy has hardly been addressed empirically because of the absence of methods to measure utility outside the context of risk. We introduce a method to measure utility over time and compare utility under risk and utility over time. We distinguish between gains and losses and also measure loss aversion. In two experiments we found that utility under risk and utility over time differed and were uncorrelated. Utility under risk was more curved than utility over time. Subjects were loss averse both for risk and for time, but loss aversion was more pronounced for risk. Loss aversion over risk and time were uncorrelated. This suggests that loss aversion, although important in both decision contexts, is volatile and subject to framing. This paper was accepted by Rakesh Sarin, decision analysis.

Keywords: decision under risk; intertemporal choice; nature of utility; prospect theory; discounting; loss aversion (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.1120.1690 (application/pdf)

Related works:
Working Paper: Is There One Unifying Concept of Utility?An Experimental Comparison of Utility Under Risk and Utility Over Time (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:inm:ormnsc:v:59:y:2013:i:9:p:2153-2169

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().