ECO450 Decision Theory [2020]

Aims and Objectives

This course aims to build the foundation of decision analysis and decision making for Economics students. At the end of the course, the students shall acquire basic knowledge about uncertainty, risk, utility and decision under uncertainty. The content of the course includes; Heuristics, Decision making with and without probabilities, Statistical Decision Theory, Utility Theory, How to measure utility and use utility function for decisions, decision trees, simulation, stochastic dominance and efficient frontier for decision makers.

Please click here for Midterm Exam Results

• Introduction to Decision Theory slides

• Heuristics slides

• Probability Review slides

• Statistical Decision Theory slides

• Utility Theory, Utility Function slides pdf

• Measuring Utility - Single/Multi Attribute slides pdf

• Decision Trees

  • Construction of Trees for simple problems slides pdf
    
  • Decision Trees as a tool for Classification/Prediction
    
  • How to Learn Tree Parameters for Real Valued Problems
    
  • Value of Information, Entropy, Mutual Information

• Monte Carlo Method slides

  • Monte Carlo Methods
    
  • A Simple Integration Tool
    
  • Monte Carlo for More Complicated Problems

• Simulation slides pdf

  • Steps for Simulation
  • Stochastic Dominance
    • First Order
    • Second Order
  • Efficient Frontiers
  • Frontiers/Efficiency Analysis
  • Portfolio Theory

References and Suggested Readings

• Decision Analysis for Management Judgement, Paul Goodwin, Geoge Wright.

• Thinking and Deciding, J. Baron

• The Three Secrets of Wise Decision Making, Barry Anderson

• Statistics for Business and Economics, Paul Newbold, W. Carlson and B. Thorne (Statistical Decision Theory - Chap 19)

• Class Notes