Optimizing Happiness

  • Manel Baucells
  • Rakesh K. Sarin
Chapter
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 148)

Abstract

We consider a resource allocation problem in which time is the principal resource. Utility is derived from time-consuming leisure activities, as well as from consumption. To acquire consumption, time needs to be allocated to income generating activities (i.e., work). Leisure (e.g., social relationships, family, and rest) is considered a basic good, and its utility is evaluated using the Discounted Utility Model. Consumption is adaptive and its utility is evaluated using a reference-dependent model. Key empirical findings in the happiness literature can be explained by our time allocation model. Further, we examine the impact of projection bias on time allocation between work and leisure. Projection bias causes individuals to overrate the utility derived from income; consequently, individuals may allocate more than the optimal time to work. This misallocation may produce a scenario in which a higher wage rate results in a lower total utility.

Keywords

Obesity Cage Transportation Cortisol Income 

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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  • Manel Baucells
    • 1
  • Rakesh K. Sarin
    • 2
  1. 1.Department of Managerial Decision SciencesIESE Business SchoolBarcelonaSpain
  2. 2.Decisions, Operations & Technology Management Area, UCLA Anderson School of Management, University of CaliforniaLos AngelesUSA

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