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Affective decision making: A theory of optimism bias

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  • Bracha, Anat
  • Brown, Donald J.
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    Abstract

    Optimism bias is inconsistent with the independence of decision weights and payoffs found in models of choice under risk and uncertainty, such as expected utility theory, subjective expected utility, and prospect theory. We therefore propose an alternative model of risky and uncertain choice where decision weights—affective or perceived risk—are endogenous.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0899825611001825
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    Bibliographic Info

    Article provided by Elsevier in its journal Games and Economic Behavior.

    Volume (Year): 75 (2012)
    Issue (Month): 1 ()
    Pages: 67-80

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    Handle: RePEc:eee:gamebe:v:75:y:2012:i:1:p:67-80

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    Web page: http://www.elsevier.com/locate/inca/622836

    Related research

    Keywords: Affective expected utility; Optimism bias; Demand for insurance;

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    Cited by:
    1. Xiaodong Du & Hongli Feng & David A. Hennessy, 2014. "Rationality of Choices in Subsidized Crop Insurance Markets," Center for Agricultural and Rural Development (CARD) Publications 14-wp545, Center for Agricultural and Rural Development (CARD) at Iowa State University.

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