Affective Decision Making and the Ellsberg Paradox

Preprint OPEN
Anat Bracha ; Donald J. Brown (2008)
  • Subject: Ellsberg paradox, Schmeidler's axiom, Affective decision making, Variational preferences, Legendre-Fenchel conjugate | Affective choice, Endogenous risk perception, Insurance, Ellsberg paradox, Variational preferences, Ambiguity-seeking
    • jel: jel:G22 | jel:D01 | jel:D81

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 a... View more
  • References (40)
    40 references, page 1 of 4

    [1] Akerlof, G.A., and Dickens, W.T. (1982), “The Economic Consequences of Cognitive Dissonance,” American Economic Review, 72(3): 307–19.

    [2] Allais, M. (1953), “Le comportement de l’homme rationnel devant le risque: critique des postulats et axiomes de l’École Américaine,”Econometrica 21: 503– 546.

    [5] Benhabib J., and Bisin, A. (2005), “Modelling Internal Commitment Mechanisms and Self-Control: A Neuroeconomics Approach to Consumption-Saving Decisions,” Games and Economic Behavior, 52: 460–492.

    [6] Bernheim, B.D. and Rangel, A. (2004), “Addiction and Cue-Triggered Decision Processes,” American Economic Review, 94(5): 1558–1590..

    [7] Bodner, R., and Prelec, D. (2001), “Self-Signaling and Diagnostic Utility in Everyday Decision Making,” mimeo, MIT.

    [8] Brocas, I., and Carrillo, J.D. (2008), “Theories of the Mind,” American Economic Review Papers and Proceedings, 98(2): 175–80.

    [9] Brunnermeier, M.K., and Parker, J.A. (2005), “Optimal Expectations,” American Economics Review, 95(4): 1092–1118.

    [10] Camerer, C.F., Loewenstein, G., and Prelec, D. (2004), “Neuroeconomics: Why Economics Needs Brains,”Scandinavian Journal of Economics, 106(3): 555–579.

    [11] Caplin, A., and Leahy, J. (2001), “Psychological Expected Utility Theory and Anticipatory Feelings,” Quarterly Journal of Economics, 116(1): 55–79.

    [12] Caplin, A., and Leahy, J. (2004), “The Supply of Information by a Concerned Expert,” Economic Journal, 114(497): 487–505.

  • Metrics
    No metrics available
Share - Bookmark