Determinants of Experienced Utility: Laws and Implications

Satisfaction in experiencing the future depends on decisions made today. We consider six well-known psychological laws governing satisfaction. The laws capture habit formation and satiation. We show it is possible to formalize these laws by means of a utility model and to derive implications from the laws: wanting versus liking, crescendo, recharge periods, variety seeking, and craving. The discussion combines mathematical propositions, experimental findings in psychology, and time-honored wisdom. We discuss how the sixth law—projection bias—may lead to incorrect predictions of experienced utility and suboptimal life-balance choices.