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CEP discussion paper
Models of affective decision-making: how do feelings predict choice?
Caroline J. Charpentier, Jan-Emmanuel De Neve, Jonathan P. Roiser and Tali Sharot February 2016
Paper No' CEPDP1408:
Full Paper (pdf)

JEL Classification: D01; D03; D81

Tags: decision-making; feelings; subjective well-being; value; utility; prospect theory

Intuitively, how we feel about potential outcomes will determine our decisions. Indeed, one of the most influential theories in psychology, Prospect Theory, implicitly assumes that feelings govern choice. Surprisingly, however, we know very little about the rules by which feelings are transformed into decisions. Here, we characterize a computational model that uses feelings to predict choice. We reveal that this model predicts choice better than existing value-based models, showing a unique contribution of feelings to decisions, over and above value. Similar to Prospect Theory value function, feelings showed diminished sensitivity to outcomes as value increased. However, loss aversion in choice was explained by an asymmetry in how feelings about losses and gains were weighed when making a decision, not by an asymmetry in the feelings themselves. The results provide new insights into how feelings are utilized to reach a decision.