14127_lec8_happi

14127_lec8_happi - 14.127 Behavioral Economics (Lecture 8)...

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14.127 Behavioral Economics (Lecture 8) Xavier Gabaix April 1, 2004
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1 Decision utility Economists use the word “utility” to describe the preferences that ratio- nalize observed choices. Kahneman calls these revealed preferences “decision utility”. These are the preferences that rationalize decisions. These are the preferences that coincide with “wanting” and “choosing.” For an addict the decision utility of drug consumption exceeds the decision utility of quitting.
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2 Experienced utility Kahneman also measures the hedonic consequences of choices. He calls these actual hedonic experiences, “experienced utility.” These are the preferences that coincide with “doing.” This is how Jeremy Bentham (1748-1832) conceived of utility (pleasure and pain) How do you measure hedonic experiences (e.g., well-being)? How do you discount these experiences over time?
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Measuring experienced utility: observer ratings real-time self-reports of mood, pain, pleasure, or happiness (palm pilot) facial measures autonomic measures (autonomic nervous system, including electrodermal, respiratory, and cardiovascular) vocal measures (pitch, loudness, tone, quality, timing)
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left brain assymetry (electroencephalogram – EEG) responses to emotion-sensitive tasks (e.g., Would you like to talk with a good friend?)
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Why might decision utility and experienced utility fail to coincide?
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14127_lec8_happi - 14.127 Behavioral Economics (Lecture 8)...

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