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Economic Consequences of Mispredicting Utility

Frey, Bruno ; Stutzer, Alois

In: Journal of Happiness Studies, 2014, vol. 15, no. 4, p. 937-956

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    Titre
    • Economic Consequences of Mispredicting Utility
    Auteur
    • Frey, Bruno. Department of Economics, University of Zurich, Hottingerstrasse 10, 8032, Zurich, Switzerland
    • Stutzer, Alois. Faculty of Business and Economics, University of Basel, Peter Merian-Weg 6, 4002, Basel, Switzerland
    Type de document
    • Postprint
    Langue
    • Anglais
    Publié dans
    • Journal of Happiness Studies, 2014, vol. 15, no. 4, p. 937-956. Springer Netherlands
    Autre version électronique
    Identifiant OAI-PMH
    • oai:doc.rero.ch:326014
    Summary
    In a simple conceptual framework, we organize a multitude of phenomena related to the (mis)prediction of utility. Consequences in terms of distorted choices and lower well-being emerge if people have to trade-off between alternatives that are characterized by attributes satisfying extrinsic desires and alternatives serving intrinsic needs. Thereby the neglect of asymmetries in adaptation is proposed as an important driver. The theoretical analysis is consistent with econometric evidence on commuting choice using data on subjective well-being. People show substantial adaptation to a higher labor income but not to commuting. This may account for the finding that people are not compensated for the burden of commuting.