Decision Theory

(3 Credit Hours) · Undergraduate

Decision Theory seeks to model choices made by individual agents and thereby serves as an important foundation for the economic study of human behavior. The goal of this class is to understand core concepts in decision theory, to learn how to interpret empirical data and to discuss both the need for formal models and their shortcomings in capturing important psychological factors. Topics will include the definition of rationality, the equivalence between preference relations and choice rules, the meaning of utility functions, and the role of uncertainty. A special emphasis is put on careful mathematical reasoning and explicitly identifying the underlying assumptions behind commonly used concepts. Interactive components will help students identify ways in which they violate basic assumptions and explore reasons for doing so, as well as ways to overcome easily exploitable choice biases.