Econ 476/Econ 676/CS 576: Course Outline

In the outline K refers to the book by Kreps and R refers to the book by Resnik.
1.
Introduction -- What is Decision Theory about?
Readings: K - Chapter 1 and R - Chapter 1.
2.
Static Decision Theory -- Certain Prospects
(a)
Choice and Revealed Preference Readings: K - Chapter 2.
  • Alternatives
  • Choice Functions
  • Preferences
(b)
Numerical Representation of Preferences Readings: K - Chapter 3.
  • Representation Theorems
  • Optimization
3.
Decision Rules and Uncertainty
(a)
Set-up: States, Actions, Outcomes, Order Readings: K - Chapter 3.
(b)
A Zoo of Decision Rules
i.
Without probabilities Readings: R - Chapter 2.
  • admissible
  • maxmin
  • minimax regret
  • Competitive Ratio
ii.
With probabilities Readings: R - Chapter 3.
  • EU
  • min expected regret
iii.
With other representations of uncertainty
  • Multiple Priors
  • Other
4.
EU Theories
(a)
Theory
  • Objective uncertainty, von Neumann- Morgenstern Readings: K - Chapter 5 and R - Chapter 4.1 - 4.3.
  • Subjective uncertainty, Anscombe and Aumann Readings: K - Chapter 7.
  • Subjective uncertainty, Savage Readings: K - Chapters 8,9,11.
(b)
Applications: Examples and Issues
  • Decision theory in database query optimization
  • Influence diagrams and Bayesian networks
  • Value of information, Readings: K - Chapter 10.
  • Utility elicitation
  • Probability elicitation
5.
Problems with Decision Theories for Uncertain Prospects
(a)
Decision Theory as a model of people Readings: R - Chapter 4.4 - 4.6 and K - Chapter 14.
  • Allais
  • Ellsberg
  • Kahneman - Tversky
  • Framing
(b)
System Design
  • Unforeseen contingencies
  • Complexity
  • Robustness: Fault tolerance in different environments
6.
Intertemporal Decision Theories Readings: K - Chapter 13.
(a)
Certainty
  • Representation of decision problems
  • Backwards induction
(b)
Uncertainty
  • Intertemporal expected utility
(c)
Markov Decision Problems
  • the recursive structure -- Bellman's equation
  • learning
  • Complexity-theoretic issues
(d)
Criticisms
  • Representation of information
  • Time-inconsistency and self-control