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Consistency and Refutability of Affective Choice

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  • Anat Bracha

Abstract

We consider a model of affective decision making in the state preference model of uncertainty, where we prove that affective choice is testable in insurance markets and complete financial markets. Moreover we extend these results to equilibrium models of mutual insurance and an interesting class of Knightian uncertainty models. These results imply the existence of axioms on observed choice behavior that characterize affective choice in these markets.

Suggested Citation

  • Anat Bracha, 2004. "Consistency and Refutability of Affective Choice," Yale School of Management Working Papers amz2639, Yale School of Management.
    • Handle: RePEc:ysm:wpaper:amz2639
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    References listed on IDEAS

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    1. Donald J. Brown & Rosa L. Matzkin, 2008. "Testable Restrictions on the Equilibrium Manifold," Lecture Notes in Economics and Mathematical Systems, in: Computational Aspects of General Equilibrium Theory, pages 11-25, Springer.
    2. Anat Bracha, 2004. "Affective Decision Making in Insurance Markets," Yale School of Management Working Papers amz2665, Yale School of Management, revised 01 Sep 2004.
    3. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
    4. Donald J. Brown & Caterina Calsamiglia, 2003. "Rationalizing and Curve-Fitting Demand Data with Quasilinear Utilities," Cowles Foundation Discussion Papers 1399R, Cowles Foundation for Research in Economics, Yale University, revised Jul 2004.
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