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Evaluating Utility Streams

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  • Ken Binmore

    (Bristol University)

Abstract

This paper proposes a radical alternative to discounting utility streams that allows each payoff in a stream to be treated equally. It is based on the psychology of how humans perceive time—not as the objective clicking of time on a clock—but in terms of the incidents to which attention needs to be paid. The paper’s conclusions receive some support from the discovery of the Peak-End Rule, in which laboratory subjects recall only the worst and the last experience during painful episodes.

Suggested Citation

  • Ken Binmore, 2021. "Evaluating Utility Streams," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 38(1), pages 1-14, December.
    • Handle: RePEc:spr:homoec:v:38:y:2021:i:1:d:10.1007_s41412-021-00114-3
    DOI: 10.1007/s41412-021-00114-3
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    References listed on IDEAS

    as
    1. Binmore, Ken, 2016. "Life And Death," Economics and Philosophy, Cambridge University Press, vol. 32(1), pages 75-97, March.
    2. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Maximin criterion; Subjective time; Discounting; Peak-End Rule;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology

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