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Affective Decision Making in Insurance Markets

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  • Anat Bracha

Abstract

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.

Suggested Citation

  • Anat Bracha, 2004. "Affective Decision Making in Insurance Markets," Yale School of Management Working Papers amz2665, Yale School of Management, revised 01 Sep 2004.
    • Handle: RePEc:ysm:wpaper:amz2665
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    File URL: https://repec.som.yale.edu/icfpub/publications/2665.pdf
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    References listed on IDEAS

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