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Behavioral Decision Theory


This course presents a modern introduction to decision making and decision theory. We will discuss behavioral (experimental) evidence of decision biases and heuristics in economic frameworks, real-world examples of actual decision-making by individuals, firms, and organizations, and formal models of decision-making from both economics and psychology. The course will also include an overview of recent neuroscientific evidence on decision making. The course concentrates on individual decision-making (as opposed to group decisions or strategic decision-making, i.e. games). Topics are as follows:

  1. Normative vs. Descriptive Decision Theory
  2. Expected Utility and Subjective Expected Utility
  3. Framing, the Endowment Effect, and Other Problems
  4. Decisions Under Risk and Prospect Theory
  5. Intertemporal Decisions and Quasihyperbolic Discounting
  6. Preference Reversals
  7. Ambiguity
  8. Neuroeconomics


  • A. MAS-COLELL, M.D WHINSTON, J.R. GREEN, "Microeconomic Theory", Oxford University Press, 1995.
  • P. WAKKER, "Prospect Theory for Risk and ambiguity", Cambridge University Press, 2010. 
  • J. P. BURKETT, "Microeconomics: Optimization, Experiments, and Behavior", Oxford University Press, 2006. 
  • R.D. LUCE, H. RAIFFA, Games and Decisions, "Introduction and Critical Survey", Dover, 1990. 
  • P.C. FISHBURN, "Nonlinear Preference and Utility Theory", Baltimore, Md.: Johns Hopkins University Press, 1988. 
  • P.C. FISHBURN, "Utility Theory for Decision Making", Publications in Operations Research, No. 18. New York: John Wiley and Sons, 1970.