The aim is to introduce students to decision theory and its applications in economics, OR, finance and actuarial science.
Module will run
Autumn Term 2021-22
The aim is to introduce students to decision theory and its applications in economics, OR, finance and actuarial science. Students are introduced to axiomatic approaches to utility, expected utility, and subjective expected utility. The module also introduces behavioural critiques to expected utility theory and modern developments, such as prospect theory and multiple-prior maxmin utility.
Module learning outcomes
After successful completion the student is able to:
demonstrate how preferences over lotteries can be represented by expected utility functions;
calculate measures of risk aversion and certainty equivalents of lotteries;
describe and assess Savage’s construction of subjective expected utility (SEU);
describe behavioural critiques of SEU and consequent theoretical developments;
Academic and graduate skills
present decision theoretic analyses in a logical, rigorous, and concise way.
strict logical reasoning from assumptions to conclusion;
critically assess assumptions necessary to draw certain conclusions.
% of module mark
Online Exam Decision Theory
Special assessment rules
% of module mark
Online Exam Reassessment exam
Students will receive feedback within three weeks of the hand-in problem sets. The feedback will be handed to students personally and takes the form of comments and suggestions for improvement written on the handed in work.
Gilboa, I. (2009), “Theory of Decision under Uncertainty”, Cambridge University Press.
Berger, J.O. (1985), “Statistical Decision Theory and Bayesian Analysis” (2nd ed), Springer Verlag