Please use this identifier to cite or link to this item: https://hdl.handle.net/10620/17531
Longitudinal Study: HILDA
Title: The triumph of hope over disappointment: A note on the utility value of good health expectations
Authors: Frijters, P 
Johnston, D.W
Foster, G 
Issue Date: 2012
Pages: 206-214
Keywords: Behavioral economics
Optimism
Abstract: In this paper, we present and test the empirical implications of competing theories about how expectations of outcomes affect utility. In the first utility formulation, which is consistent with particular interpretations of disappointment, prospect theory and regret theory, individuals receive negative utility from outcomes that were worse than expected. This directly implies that expectations themselves enter utility negatively. The second utility formulation incorporates anticipatory savoring, where positive expectations about the future directly lead to more utility today. We test which of these formulations best explains actual connections between health and welfare over time, using data from the Household Income and Labour Dynamics in Australia survey. Estimated coefficients from fixed-effects ordered logit models support a strong positive utility impact of positive expectations: expecting goodhealth in the future increases happiness now. Our results are one argument for benevolent health care providers to allow individuals to maintain unrealistically positive expectations about the future.
Keywords: Health -- Wellbeing; Health
Research collection: Journal Articles
Appears in Collections:Journal Articles

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