The Role of Affect in Economic Behavior

Many economic behaviors cannot be explained by the economist’s approach that people behave according to reasoning and try to maximize some utility function. Emotions do not seem to serve a role in this approach. Many human emotions seem to be irrational. But are emotions and affect not a integral part of our lives? Which functions do emotions serve? Are emotions counterproductive and disruptive for “normal” rational behavior? Why are consumers emotional about the products and brands they use? Which emotions play a role in investment behavior? Why do people actively seek sensations in sports and in watching movies? In this chapter, we distinguish several functions of affective processes in general and in economic behavior in particular, and withdraw from the notion that emotions are only irrational and dysfunctional.

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