Econ 476/Econ 676/CIS 576: Course Outline

1. Introduction -- What is Decision Theory about?

2. Static Decision Theory -- Certain Prospects
(a) Choice and Revealed Preference (Readings: Chapter 2)
  • Alternatives
  • Choice Functions
  • Preferences
(b) Representation of Preferences (Readings: Chapter 3)
  • Numerical Representation
  • Optimization
  • Graphical Representation

3. Decision Rules and Uncertainty
(a) Set-up: States, Actions, Outcomes, Order (Readings: Chapter 3)
(b) A Zoo of Decision Rules
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
  • Other

4. Expected Utility Theories
(a) Theory
  • Objective uncertainty, von Neumann- Morgenstern (Readings: Chapter 5)
  • Subjective uncertainty, Anscombe and Aumann (Readings: Chapter 7)
  • Subjective uncertainty, Savage (Readings: Chapters 8,9,11)
(b) Applications: Examples and Issues (Readings: Chapter 10 and handouts)
  • Decision theory in database query optimization
  • Influence diagrams and Bayesian networks
  • Value of information
  • Utility elicitation
  • Probability elicitation

5. Problems with Decision Theories for Uncertain Prospects
(a) Decision Theory as a model of people (Readings: Chapter 14)
  • Allais
  • Ellsberg
  • Kahneman - Tversky
  • Framing
(b) System Design
  • Unforeseen contingencies
  • Complex state spaces