The dual nature of utility : categorical and comparative evaluations in economic decisions

Utility is perhaps the most central concept in modern economic theorizing. However, the behaviorist reduction to Revealed Preference not only removed the psychological content of utility but experimental investigations also exposed numerous anomalies in this theory. This program of research focused on the psychological processes by which utility judgments are generated. For this purpose, the standard assumption of a homogeneous concept is substituted by the Utilitarian Duality Hypothesis. In particular, judgments concerning categorical utility (uCat) infer an object's category based on its attributes which may subsequently allow the transfer of evaluative information like feelings or attitudes. In contrast, comparative utility (uCom) depends on the distance to a reference value on a specific dimension of comparison. Importantly, dimensions of comparison are manifold and context dependent. In a series of experiments, we show that the resulting Dual Utility Model is able to explain several known anomalies in a parsimonious fashion. Moreover, we identify central factors determining the relative weight assigned to both utility components. Finally, we discuss the implications of the Utilitarian Duality for both, the experimental practice in economics as well as the consequences for economic theorizing. In sum, we propose that the Dual Utility Model can serve as an integrative framework for both the rational model and its anomalies.