INTRODUCTION

Economics and psychology offer contrasting perspectives on the question of how people value things. The economic model of choice is concerned with a rational agent whose preferences obey a tight web of logical rules, formalized in consumer theory and in models of decision making under risk. The tradition of psychology, in contrast, is not congenial to the idea that a logic of rational choice can serve double duty as a model of actual decision behavior. Much behavioral research has been devoted to illustrations of choices that violate the logic of the economic model. The implied claim is that people do not have preferences, in the sense in which that term is used in economic theory (Fischhoff, 1991; Payne, Bettman, & Johnson, 1992; Slovic, 1995). It is therefore fair to ask: If people do not have economic preferences, what do they have instead? Does psychology provide theoretical notions that can, at least in some contexts, account for both apparent violations of the rational model of preference and the regularities of observed choices? Behavioral research has documented several psychological processes that provide partial answers to this question, including concepts such as mental accounting, loss aversion, and hyperbolic discounting. To this set of conceptual tools the present treatment adds the concept of attitude, which we borrow from social psychology, and the core process – we label it affective valuation – which determines the sign and the intensity of the emotional response to objects.