Abstract

This paper shows a role for emotion in rational choice. The key concept here is “time illusion”. The perception of the time spent on an activity is often different from the actual time spent, and depends on how enjoyable the activity is. Based on the conception that time illusion affects one’s evaluation of the opportunity cost of an activity, this paper integrates the concept into utility theory. Using this approach suggests that an activity that is perceived as less time intensive is demanded more as the price of time increases. The presence of time illusion leads to a deviation from rational choice, namely, over- or under-consumption