Economic Theory

, Volume 44, Issue 3, pp 415–444 | Cite as

Utility from anticipation and personal equilibrium

  • Botond KőszegiEmail author
Research Article


I develop a dynamic model of individual decisionmaking in which the agent derives utility from physical outcomes as well as from rational beliefs about physical outcomes (“anticipation”), and these two payoff components can interact. Beliefs and behavior are jointly determined in a personal equilibrium by the requirement that behavior given past beliefs must be consistent with those beliefs. I explore three phenomena made possible by utility from anticipation, and prove that if the decisionmaker’s behavior is distinguishable from a person’s who cares only about physical outcomes, she must exhibit at least one of these phenomena. First, the decisionmaker can be prone to self-fulfilling expectations. Second, she might be time-inconsistent even if her preferences in all periods are identical. Third, she might exhibit informational preferences, where these preferences are intimately connected to her attitudes toward disappointments. Applications of the framework to reference-dependent preferences, impulsive behaviors, and emotionally difficult choices are discussed.


Anticipation Personal equilibrium Time inconsistency Disappointment aversion 

JEL Classification

B49 D89 


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Copyright information

© Springer-Verlag 2009

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of CaliforniaBerkeleyUSA

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