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Affective Decision Making: a Behavioral Theory of Choice

Listed author(s):
  • Anat Bracha
  • Donald J Brown

Affective decision-making is a strategic model of choice under risk and uncertainty where we posit two cognitive processes — the "rational" and the "emotional" process. Observed choice is the result of equilibirum in this intrapersonal game. As an example, we present applications of affective decision-making in insurance markets, where the risk perceptions of consumers are endogenous. We then derive the axiomatic foundation of affective decision making, and show that, although beliefs are endogenous, not every pattern of behavior is possible under affective decision making.

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File URL: http://cowles.econ.yale.edu/P/cd/d16a/d1633.pdf
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Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000001676.

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Date of creation: 15 Nov 2007
Handle: RePEc:cla:levrem:122247000000001676
Contact details of provider: Web page: http://www.dklevine.com/

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