Document Type
Discussion Paper
Publication Date
11-1-2007
CFDP Number
1633R
CFDP Revision Date
2009-04-01
CFDP Pages
22
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.
Recommended Citation
Bracha, Anat and Brown, Donald J., "Affective Decision Making: A Behavioral Theory of Choice" (2007). Cowles Foundation Discussion Papers. 1932.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1932