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The Effect of Affect on Economic and Strategic Decision Making
Benjamin E. Hermalin University of California, Berkeley Alice M. Isen Cornell University - Samuel Curtis Johnson Graduate School of Management; Cornell University -- Psychology Department July 28, 2000 USC CLEO Research Paper No. C01-5 Abstract: 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.
Keywords: Affect, morale, emotion. JEL Classifications: B41, D99, C70, C73, D81 Working Paper SeriesDate posted: January 11, 2000 ; Last revised: December 04, 2003Suggested CitationContact Information
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