Affection Effect

Affection Effect

Reviewed by Faisal Zaidi

The finding that attachment to an item raises willingness to insure it even when the payout is unchanged.

What it is

Hsee and Kunreuther explained it with a consolation hypothesis: compensation works as comfort for a loss, not only as money. It is drawn from work by Christopher Hsee and Howard Kunreuther (2000).

In effect

In the article on why we buy extended warranties, it is used to show that cover can be priced partly as comfort.

What it does not say

The finding concerns willingness to insure items people feel attached to. It does not say that buying cover for a cherished item is a mistake, and the comfort explanation is the authors' proposal.

Sources

  1. Hsee, C. K., & Kunreuther, H. C. (2000). The affection effect in insurance decisions. Journal of Risk and Uncertainty, 20(2), 141-159.