## Econ 4760/Econ 6760/CS 5846: Course Outline

- 1. Introduction -- What is Decision Theory about? (Chapter 1 of Kreps)

- 2. Static Decision Theory -- Certain Prospects
- (a) Choice and Revealed Preference (Chapter 2)
- Alternatives
- Choice Functions
- Preferences

- (b) Representation of Preferences (Chapter 3)
- Numerical Representation
- Optimization

- 3. Decision Rules and Uncertainty
- (a) Set-up: States, Actions, Outcomes, Order (Chapter 3)
- (b) The role of probability (Class notes)
- (c) A Zoo of Decision Rules (Class notes)
- i. Without probabilities
- Admissible
- Maxmin
- Minimax regret
- Competitive ratio

- ii. With probabilities
- Expected utility
- Min expected regret

- iii. With other representations of uncertainty
- Multiple priors
- Nonaddditive probabilities/Choquet measures
- Other approaches

- 4. Expected Utility Theories
- (a) Theory
- Objective uncertainty, von Neumann- Morgenstern (Chapter 5)
- Subjective uncertainty, Savage (Chapters 8,9,11)

- (b) Applications: Examples and Issues (Chapter 10 and handouts)
- Decision theory in database query optimization
- Influence diagrams and Bayesian networks
- Value of information
- Utility elicitation
- Probability elicitation
- CP Networks

- 5. Problems with Decision Theories for Uncertain Prospects
- (a) Decision Theory as a model of people (Chapter 14)
- Allais
- Ellsberg
- Kahneman - Tversky
- Framing

- (b) System Design
- Unforeseen contingencies
- Complex state spaces

- 6. Cases Studies (Handouts)