The Evolution of Decision and Experienced Utilities

Arthur Robson and Larry Samuelson ()
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Larry Samuelson: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/larry-samuelson

No 1678, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Psychologists report that people make choices on the basis of "decision utilities" that routinely overestimate the "experienced utility" consequences of these choices. This paper argues that this dichotomy between decision and experienced utilities may be the solution to an evolutionary design problem. We examine a setting in which evolution designs agents with utility functions that must mediate intertemporal choices, and in which there is an incentive to condition current utilities on the agent's previous experience. Anticipating future utility adjustments can distort intertemporal incentives, a conflict that is attenuated by separating decision and experienced utilities.

Keywords: Discounting; Evolution; Present bias; Time preference (search for similar items in EconPapers)
JEL-codes: D1 D9 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2008-10, Revised 2010-02
New Economics Papers: this item is included in nep-evo and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published in Theoretical Economics (September 2011), 6(3): 311-339

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