Experienced Utility
Experienced utility concerns the pain or pleasure an outcome produces; decision utility concerns the value it receives in a choice. Kahneman’s injection puzzle asks why people might pay different amounts to avoid the same amount of pain when the proportional reductions differ.
THE IDEA
EXPERIENCED UTILITY
My fascination with the possible discrepancies between experienced utility and decision utility goes back a long way. While Amos and I were still working on prospect theory, I formulated a puzzle, which went like this: imagine an individual who receives one painful injection every day. There is no adaptation; the pain is the same day to day. Will people attach the same value to reducing the number of planned injections from 20 to 18 as from 6 to 4? Is there any justification for a distinction?
I did not collect data, because the outcome was evident. You can verify for yourself that you would pay more to reduce the number of injections by a third (from 6 to 4) than by one tenth (from 20 to 18). The decision utility of avoiding two injections is higher in the first case than in the second, and everyone will pay more for the first reduction than for the second. But this difference is absurd. If the pain does not change from day to day, what could justify assigning different utilities to a reduction of the total amount of pain by two injections, depending on the number of previous injections? In the terms we would use today, the puzzle introduced the idea that experienced utility could be measured by the number of injections. It also suggested that, at least in some cases, experienced utility is the criterion by which a decision should be assessed. A decision maker who pays different amounts to achieve the same gain of experienced utility (or be spared the same loss) is making a mistake. You may find this observation obvious, but in decision theory the only basis for judging that a decision is wrong is inconsistency with other preferences. Amos and I discussed the problem but we did not pursue it. Many years later, I returned to it.
When to use it
Choosing between two vacation packages with different sequences of activities, where the total enjoyment might be the same but the decision utility differs based on how they are distributed.
A manager evaluating employee performance improvements: reducing the number of mistakes from 20 to 18 might be valued less than from 6 to 4, even if the absolute reduction is the same.
Comparing hypothetical pain-reduction choices: reducing identical injections from 6 to 4 or from 20 to 18. The puzzle holds pain per injection constant; actual treatment choices also involve benefits and other consequences.
FROM THEORY TO EVERYDAY LIFE
In practice
The Injection Puzzle
Imagine one equally painful injection each day, with no adaptation. Kahneman predicts that people would pay more to reduce injections from 6 to 4 than from 20 to 18, although both avoid two injections. He presents this as a thought experiment and says he did not collect data.
A MOMENT TO REFLECT
Put it to work.
Think of a decision you made where the decision utility (how much you valued an outcome) differed from the experienced utility (how it actually felt). What caused the discrepancy?
How might the Pain Injection Puzzle apply to everyday health decisions, like undergoing a series of medical procedures?
Why might a proportional reduction in pain seem more valuable than an equal absolute reduction from a larger total?
Often confused with
References
- Prospect Theory: An Analysis of Decision under Risk — Daniel Kahneman and Amos Tversky (1979)
CONTINUE THE CONVERSATION
Source texts
- Thinking, Fast and Slow (Daniel Kahneman)