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The Affection Effect in Insurance Decisions

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Author Info
 Hsee, Christopher K
Kunreuther, Howard C
Abstract

We use insurance behavior as a context to study affective influences in seemingly purely monetary decisions. We report two related findings. First, people are more willing to purchase insurance for an object at stake, the more affection they have for the object, holding the amount of compensation constant. Second, if the object is damaged, people are also more willing to go through the trouble of claiming a fixed amount of compensation, the more affection they have for the object. These effects are not predicted by standard decision theories. We explain these findings by a "consolation hypothesis," according to which, people perceive insurance compensation as a token of consolation, and we discuss its implications for affective influences in other types of decisions. Copyright 2000 by Kluwer Academic Publishers

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Publisher Info
Article provided by Springer in its journal Journal of Risk and Uncertainty.

Volume (Year): 20 (2000)
Issue (Month): 2 (March)
Pages: 141-59
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Handle: RePEc:kap:jrisku:v:20:y:2000:i:2:p:141-59

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  1. Daniel Vastfjall & Ellen Peters & Paul Slovic, 2008. "Affect, risk perception and future optimism after the tsunami disaster," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 3, pages 64-72, January. [Downloadable!]
  2. David H. Krantz & Howard Kunreuther, 2006. "Goals and Plans in Protective Decision Making," NBER Working Papers 12446, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Ian Bateman & Sam Dent & Ellen Peters & Paul Slovic & Chris Starmer, 2006. "The Affect Heuristic and the Attractiveness of Simple Gambles," Discussion Papers 2006-18, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham. [Downloadable!]
  4. Eldar Shafir, 2003. "Context, conflict, weights, and identities: some psychological aspects of decision making," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, issue Jun. [Downloadable!]
  5. David H. Krantz & Howard C. Kunreuther, 2007. "Goals and plans in decision making," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 2, pages 137-168, June. [Downloadable!]
  6. Howard Kunreuther, 2001. "Risk Analysis and Risk Management in an Uncertain World," Center for Financial Institutions Working Papers 02-08, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
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