Article2015

The Influence of Affect on Heuristic Thinking in Insurance Demand

Johannes Gerd Jaspersen · Vijay Aseervatham

39 citations0/0 files storedJournal of Risk & Insurance

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Decision-Making and Behavioral Economics Insurance and Financial Risk Management Experimental Behavioral Economics Studies

Abstract

Abstract Heuristic thinking can influence human behavior in decisions under risk and uncertainty. In an experimental setting, we study whether emotional activation primes individuals to use the representativeness heuristic and the affect heuristic. We observe the decision behavior of 272 subjects in a computer‐based experiment that differentiates between incidental affect and integral affect. Positive incidental affect and integral affect increase the use of the representativeness heuristic, while negative incidental affect has no effect. Our findings have statistical and economic significance and carry implications for insurance companies and regulators.

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1978Specification Tests in Econometrics 2007z-Tree: Zurich toolbox for ready-made economic experiments 1982Judgment under Uncertainty 1998What Good Are Positive Emotions?2002Risk Aversion and Incentive Effects 1980A multidimensional approach to individual differences in empathy 1982Judgment under uncertainty: Causality and attribution 1993The Adaptive Decision Maker

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2019Flood insurance demand and probability weighting: The influences of regret, worry, locus of control and the threshold of concern heuristic 2017An inclusive taxonomy of behavioral biases 2018Representativeness heuristics: a literature review of its impacts on the quality of decision-making 2022Behavioral Economics and Auto Insurance: The Role of Biases and Heuristics 2021Optimism, overconfidence, and insurance decisions 2015The affection effect in an incentive compatible insurance demand experiment

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