COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1633 Affective Decision Making: A Behavioral Theory of Choice Anat Bracha and Donald J. Brown November 2007 Affective decision-making (ADM) is a refutable and predictive theory of individual
choice under risk and uncertainty. It generalizes expected utility theory by positing the
existence of two cognitive processes — the "rational" and the
"emotional" process. Observed choice is the result of their simultaneous
interaction. We present a model of affective choice in insurance markets, where risk
perceptions are endogenous. |
