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Affective Decision Making: A Behavioral Theory of Choice

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Author Info
Anat Bracha (Eitan Berglas School of Economics, Tel Aviv University)
Donald J. Brown () (Dept. of Economics, Yale University)
Abstract

Affective decision-making (ADM) is a refutable and predictive theory of individual choice under risk and uncertainty. It generalizes expected utility theory by positing the existence of two cognitive processes -- the "rational" and the "emotional" process. Observed choice is the result of their simultaneous interaction. We present a model of affective choice in insurance markets, where risk perceptions are endogenous.

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Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1633.

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Length: 28 pages
Date of creation: Nov 2007
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Handle: RePEc:cwl:cwldpp:1633

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Related research
Keywords: Affective choice; Endogenous risk perception; Expected utility theory; Insurance;

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Find related papers by JEL classification:
D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. B. Douglas Bernheim & Antonio Rangel, 2004. "Addiction and Cue-Triggered Decision Processes," American Economic Review, American Economic Association, vol. 94(5), pages 1558-1590, December. [Downloadable!]
  2. Kalai, Gil, 2003. "Learnability and rationality of choice," Journal of Economic Theory, Elsevier, vol. 113(1), pages 104-117, November. [Downloadable!] (restricted)
  3. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December. [Downloadable!]
  4. Drew Fudenberg & David K. Levine, 2006. "A Dual Self Model of Impulse Control," Harvard Institute of Economic Research Working Papers 2112, Harvard - Institute of Economic Research. [Downloadable!]
    Other versions:
  5. Donald J. Brown & Chris Shannon, 2000. "Uniqueness, Stability, and Comparative Statics in Rationalizable Walrasian Markets," Econometrica, Econometric Society, vol. 68(6), pages 1529-1540, November.
    Other versions:
  6. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  7. Keller, Punam Anand & Block, Lauren Goldberg, 1996. " Increasing the Persuasiveness of Fear Appeals: The Effect of Arousal and Elaboration," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 22(4), pages 448-59, March.
  8. Abraham Neyman, 1997. "Correlated Equilibrium and Potential Games," International Journal of Game Theory, Springer, vol. 26(2), pages 223-227.
  9. Donald J. Brown & Caterina Calsamiglia, 2003. "Rationalizing and Curve-Fitting Demand Data with Quasilinear Utilities," Cowles Foundation Discussion Papers 1399R, Cowles Foundation, Yale University, revised Jul 2004. [Downloadable!]
  10. Monderer, Dov & Shapley, Lloyd S., 1996. "Potential Games," Games and Economic Behavior, Elsevier, vol. 14(1), pages 124-143, May. [Downloadable!] (restricted)
  11. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Deb, Rahul, 2008. "Interdependent Preferences, Potential Games and Household Consumption," MPRA Paper 6818, University Library of Munich, Germany. [Downloadable!]
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