COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1678 The Evolution of Decision and Experienced Utilities Arthur Robson and Larry Samuelson October 2008 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. |
