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Keywords:

  • prospect theory;
  • rational choice;
  • emotion;
  • preferences;
  • decision-making

This paper represents an attempt to bridge the gap between rational and psychological models of choice, as represented by expected utility theory and prospect theory, and to show how researchers from different traditions can start to work together on problems of interest to both. A central issue for both models concerns the origin of preferences and how they might be predicted. Two questions of interest to all social scientists are related to the formation of preferences: What determines what people want, and what determines what people do once they know what they want? The incorporation of emotion into models of decision-making may help users of divergent models find common ground for exploration and investigation.