Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/80693 
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Papers No. 7430
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
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 wellbeing 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.
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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