Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/214318 
Year of Publication: 
2004
Series/Report no.: 
CREMA Working Paper No. 2005-04
Publisher: 
Center for Research in Economics, Management and the Arts (CREMA), Basel
Abstract: 
Individuals make systematic mistakes in their decisions, because they mispredict utility from choice options. When deciding, extrinsic attributes of choice options are more salient than intrinsic attributes. Adaptation is neglected, recollection of feelings is distorted, decisions are rationalized and wrong intuitive theories of happiness are applied. People overestimate extrinsic attributes and therefore put too much emphasis on acquiring income and gaining status. In contrast, they underestimate intrinsic attributes and devote too little time to their family, friends or hobbies, which lowers their utility level. The theoretical analysis is consistent with an econometric study on commuting decisions using reported subjective well-being data.
Subjects: 
adaptation
extrinsic/intrinsic attributes
individual decision-making
misprediction
subjective well-being
time allocation
JEL: 
A12
D11
D12
D84
I31
J22
Document Type: 
Working Paper

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