Title: Suboptimal choices and the need for experienced individual well-being in economic analysis

Authors: Christopher K. Hsee; Yuval Rottenstreich; Alois Stutzer

Addresses: Booth School of Business, University of Chicago, 5807 South Woodlawn Avenue, Chicago, IL 60637, USA. ' Leonard N. Stern School of Business, New York University, Tisch Hall, 40 West 4th Street, New York, NY 10012, USA. ' Faculty of Business and Economics, University of Basel, Peter Merian-Weg 6, 4002 Basel, Switzerland

Abstract: Standard economic analysis assumes that people make choices that maximise 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 maximise utility. Our review is meant to highlight the possibility of a research programme that combines economic analysis with measures of individuals' experienced well-being to improve people's happiness.

Keywords: suboptimal choices; individual well-being; experienced utility; evaluation mode; salient rule; utility misprediction; economic analysis; happiness.

DOI: 10.1504/IJHD.2012.050826

International Journal of Happiness and Development, 2012 Vol.1 No.1, pp.63 - 85

Received: 10 Feb 2012
Accepted: 29 Jun 2012
Published online: 30 Aug 2014 *

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