Suboptimal Choices and the Need for Experienced Individual Well-Being in Economic Analysis

Standard economic analysis assumes that people make choices that maximize their utility. Yet both popular discourse and other fields assume that people sometimes fail to make optimal choices and thus adversely affect their own happiness. Most social sciences thus frequently describe some patterns of decision as suboptimal. We review evidence of suboptimal choices that arise for two reasons. First, people err in predicting the utility they may accrue from available choice options due to the evaluation mode. Second, people choose on the basis of salient rules that are unlikely to maximize utility. Our review is meant to highlight the possibility of a research program that combines economic analysis with measures of experienced individual well-being to improve people's happiness.suboptimal choice, individual well-being, experienced utility, evaluation mode, salient rule, utility misprediction

Future–present relationship insensitivity : a new perspective on psychological myopia and psychological hyperopia

How much joy versus pain people choose to experience for the present often inversely affects how much joy versus pain they will experience in the future. Do people make choices that maximize their overall happiness? Prior research suggests that people are generally myopic (i.e., over‐choosing joy for the present). We suggest that the prior research may have biasedly focused only on situations in which the future is more important than the present. Rather, people are generally insufficiently sensitive to the relative importance of the present versus the future. When the future is more important than the present, people over‐choose joy for the present, thus appearing myopic, but when the future is less important than the present, people under‐choose joy for the present, thus appearing hyperopic. Six experiments (along with a reason‐exploration study) demonstrate our propositions and show that forcing or nudging people to choose less (more) joy for the present when the future is more (less) important increases their overall happiness. This research challenges the popular view that people are generally myopic, and supports emerging research showing that people are generally situation‐insensitive and can exhibit seemingly opposite biases (e.g., myopia and hyperopia) in different situations

Lay Rationalism and Inconsistency between Predicted Experience and Decision

Decision-makers are sometimes depicted as impulsive and overly influenced by ‘hot’, affective factors. The present research suggests that decision-makers may be too ‘cold’ and overly focus on rationalistic attributes, such as economic values, quantitative specifications, and functions. In support of this proposition, we find a systematic inconsistency between predicted experience and decision. That is, people are more likely to favor a rationalistically-superior option when they make a decision than when they predict experience. We discuss how this work contributes to research on predicted and decision utilities; we also discuss when decision-makers overweight hot factors and when they overweight cold factors. Copyright © 2003 John Wiley & Sons, Ltd

Process account of curiosity and interest: a reward-learning perspective

Previous studies suggested roles for curiosity and interest in knowledge acquisition and exploration, but there has been a long-standing debate about how to define these concepts and whether they are related or different. In this paper, we address the definition issue by arguing that there is inherent difficulty in defining curiosity and interest, because both curiosity and interest are naïve concepts, which are not supposed to have a priori scientific definitions. We present a reward-learning framework of autonomous knowledge acquisition and use this framework to illustrate the importance of process account as an alternative to advance our understanding of curiosity and interest without being troubled by their definitions. The framework centers on the role of rewarding experience associated with knowledge acquisition and learning and posits that the acquisition of new knowledge strengthens the value of further information. Critically, we argue that curiosity and interest are the concepts that they subjectively construe through this knowledge-acquisition process. Finally, we discuss the implications of the reward-learning framework for education and empirical research in educational psychology

Unshrouding Effects on Demand for a Costly Add-On: Evidence from Bank Overdrafts in Turkey

Models of shrouding predict that firms lack incentives to compete on add-on prices. Working with a large Turkish bank to test SMS direct marketing promotions to 108,000 existing checking account holders, we find that messages promoting a large discount on the overdraft interest rate reduce overdraft usage. In contrast, messages that mention overdraft availability without mentioning price increase usage. Neither change persists long after messages stop, suggesting that induced overdrafting is not habit-forming. Our results are consistent with a model of limited memory and attention