publication . Preprint . Article . 2000

The Effect of Affect on Economic and Strategic Decision Making.

Benjamin E. Hermalin; Alice M. Isen;
Open Access
  • Published: 16 Feb 2000
The standard economic model of decision making assumes a decision maker makes her choices to maximize her utility or happiness. Her current emotional state is not explicitly considered. Yet there is a large psychological literature that shows that current emotional state, in particular positive affect, has a significant effect on decision making. This paper offers a way to incorporate this insight from psychology into economic modeling. Moreover, this paper shows that this simple insight can parsimoniously explain a wide variety of behaviors.
free text keywords: Strategic decision making, Happiness, media_common.quotation_subject, media_common, Decision engineering, Decision fatigue, Business decision mapping, Psychology, Affect (psychology), Decision analysis, Social psychology, Economic model, Microeconomics, jel:B41, jel:D99, jel:C70, jel:C73, jel:D81
Funded by
NSF| Collaborative Research: On Corporate Governance as an Endogenous Economic Institution
  • Funder: National Science Foundation (NSF)
  • Project Code: 9616675
  • Funding stream: Directorate for Social, Behavioral & Economic Sciences | Division of Social and Economic Sciences
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29 references, page 1 of 2
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publication . Preprint . Article . 2000

The Effect of Affect on Economic and Strategic Decision Making.

Benjamin E. Hermalin; Alice M. Isen;