Suboptimal Choices and the Need for Experienced Individual Well-Being in Economic Analysis

Christopher K. Hsee (), Yuval Rottenstreich () and Alois Stutzer
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Christopher K. Hsee: University of Chicago
Yuval Rottenstreich: New York University

No 6346, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Standard economic analysis assumes that people make choices that maximize their utility. Yet both popular discourse and other fields assume that people sometimes fail to make optimal choices and thus adversely affect their own happiness. Most social sciences thus frequently describe some patterns of decision as suboptimal. We review evidence of suboptimal choices that arise for two reasons. First, people err in predicting the utility they may accrue from available choice options due to the evaluation mode. Second, people choose on the basis of salient rules that are unlikely to maximize utility. Our review is meant to highlight the possibility of a research program that combines economic analysis with measures of experienced individual well-being to improve people's happiness.

Keywords: evaluation mode; experienced utility; individual well-being; suboptimal choice; utility misprediction; salient rule (search for similar items in EconPapers)
JEL-codes: D01 D11 D60 D91 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2012-02
New Economics Papers: this item is included in nep-cbe, nep-hap and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Published - published in: International Journal of Happiness and Development, 2012, 1 (1), 63-85

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Journal Article: Suboptimal choices and the need for experienced individual well-being in economic analysis (2012)
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