The Effect of Affect on Economic and Strategic Decision Making
22 Pages Posted: 11 Jan 2000
Date Written: July 28, 2000
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 Classification: B41, D99, C70, C73, D81
Suggested Citation: Suggested Citation
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