Affective Decision Making in Insurance Markets
This paper suggests incorporating affective considerations into decision making theory and insurance decision in particular. I describe a decision maker with two internal accounts - the rational account and the mental account. The rational account decides on insurance to maximize expected (perceived) utility, while the mental account chooses risk perceptions which then affect the perceived expected utility. The two accounts interact to reach a decision which is composed of both risk perception and insurance level. The model is based on psychology research and shows interesting results for the insurance markets. Also, this framework helps to distinguish between report and choice tasks.
|Date of creation:||01 Jan 2004|
|Date of revision:||01 Sep 2004|
|Contact details of provider:|| Web page: http://icf.som.yale.edu/|
More information through EDIRC
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.:
- Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-319, June.
- Joseph Eisenhauer, 1997. "Risk aversion, wealth, and the DARA hypothesis: A new test," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 3(1), pages 46-53, February.
- Alarie, Yves & Dionne, Georges, 2001. "Lottery Decisions and Probability Weighting Function," Journal of Risk and Uncertainty, Springer, vol. 22(1), pages 21-33, January.
- Tomas Philipson & John Cawley, 1999.
"An Empirical Examination of Information Barriers to Trade in Insurance,"
American Economic Review,
American Economic Association, vol. 89(4), pages 827-846, September.
- John Cawley & Tomas Philipson, 1996. "An Empirical Examination of Information Barriers to Trade in Insurance," NBER Working Papers 5669, National Bureau of Economic Research, Inc.
- John Cawley & Tomas Philipson, 1997. "An Empirical Examination of Information Barriers to Trade inInsurance," University of Chicago - George G. Stigler Center for Study of Economy and State 132, Chicago - Center for Study of Economy and State.
- Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Leeat Yariv, 2001. "Believe and Let Believe: Axiomatic Foundations for Belief Dependent Utility Functionals," Cowles Foundation Discussion Papers 1344, Cowles Foundation for Research in Economics, Yale University.
- Grether, David M & Plott, Charles R, 1979. "Economic Theory of Choice and the Preference Reversal Phenomenon," American Economic Review, American Economic Association, vol. 69(4), pages 623-638, September.
- Grether, David M. & Plott, Charles R., "undated". "Economic Theory of Choice and the Preference Reversal Phenomenon," Working Papers 152, California Institute of Technology, Division of the Humanities and Social Sciences.
- Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December. Full references (including those not matched with items on IDEAS)