Differences between Decision and Experienced Utility: An Investigation using the Choice Experiment method

Citation

Tinch D, Colombo S & Hanley N (2010) Differences between Decision and Experienced Utility: An Investigation using the Choice Experiment method. Stirling Economics Discussion Paper, 2010-13.

Abstract
Recent work by Kahneman and others has led to a new focus in economics on a wellbeing-based approach to utility. This suggests that ‘experienced utility’ is an alternative and more appropriate basis for the measurement of economic value compared with ‘decision utility’. In this paper, we apply the choice experiment technique to the valuation of changes in upland landscapes in the UK, in order to identify if experience in the moment or in memory impacts on the value associated with changes in ecosystem services under different management regimes. Four treatments are employed to measure decision utility, experienced utility, and remembered utility at two different time intervals. We show that our experienced utility treatment generates very different estimates of preferences than any of the other treatments. Whilst measurement of experienced utility is rife with difficulties, the approach taken allowed the identification of experiential impacts on utility and may have implications for the future use of experienced utility as a basis for the valuation of public goods.

Keywords
experienced utility; cost-benefit analysis; choice experiments; public goods; national parks; Environmental economics; Cost effectiveness; Public goods Cost effectiveness

JEL codes

• B10: History of Economic Thought through 1925: General
• D61: Allocative Efficiency; Cost-Benefit Analysis
• Q51: Valuation of Environmental Effects

• SEDP-2010-13-Tinch-Colombo-Hanley.pdf