Document Type
Discussion Paper
Publication Date
6-1-2008
CFDP Number
1667R
CFDP Revision Date
2008-08-01
CFDP Pages
19
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 equilibrium 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 derive the axiomatic foundation of affective decision making, and show that affective decision making is a model of ambiguity-seeking behavior consistent with the Ellsberg paradox.
Recommended Citation
Bracha, Anat and Brown, Donald J., "Affective Decision Making and the Ellsberg Paradox" (2008). Cowles Foundation Discussion Papers. 1975.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1975