Affective Decision Making: A Behavioral Theory of Choice

Anat Bracha and Donald J. Brown ()
Additional contact information
Donald J. Brown: Dept. of Economics, Yale University, https://economics.yale.edu/people/emeritus/donald-j-brown

No 1633R, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: 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.

Keywords: Affective choice; Endogenous risk perception; Insurance; Variational preferences (search for similar items in EconPapers)
JEL-codes: D01 D81 G22 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2007-11, Revised 2009-04
Note: CFP 1356
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published in Games and Economic Behavior (2012) 75: 67-80

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Related works:
Working Paper: Affective Decision Making: a Behavioral Theory of Choice (2007)
Working Paper: Affective Decision Making: A Behavioral Theory of Choice (2007)
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