Introduction

In this part of the course we begin discussion of decision theory (this week) game theory (next week). We will eventually relate these to philosophical issues and psychological discovieres about individual and joint action.

Notes

This lecture depends on you having studied some sections from a previous lecture:

Instrumental Actions: Goal-Directed and Habitual

For the minimum course of study, consider only these sections:

Expected Utility

What Are Preferences?

Dual Process Theory Opposes Decision Theory?

Alternatively, if you have more time but not enough for everything, skip Dual Process Theory Opposes Decision Theory? and study the other sections.

There is a bit more than usual to cover this week, which will be hard if this is your first encounter with decision theory.

Ask a Question

Your question will normally be answered in the question session of the next lecture.

More information about asking questions.

Glossary

decision theory : I use ‘decision theory’ for the theory elaborated by Jeffrey (1983). Variants are variously called ‘expected utility theory’ (Hargreaves-Heap & Varoufakis, 2004), ‘revealed preference theory’ (Sen, 1973) and ‘the theory of rational choice’ (Sugden, 1991). As the differences between variants are not important for our purposes, the term can be used for any of core formal parts of the standard approaches based on Ramsey (1931) and Savage (1972).

game theory : This term is used for any version of the theory based on the ideas of Neumann et al. (1953) and presented in any of the standard textbooks including. Hargreaves-Heap & Varoufakis (2004); Osborne & Rubinstein (1994); Tadelis (2013); Rasmusen (2007).

References

Hargreaves-Heap, S., & Varoufakis, Y. (2004). Game theory: A critical introduction. London: Routledge. Retrieved from http://webcat.warwick.ac.uk/record=b2587142~S1

Jeffrey, R. C. (1983). The logic of decision, second edition. Chicago: University of Chicago Press.

Neumann, J. von, Morgenstern, O., Rubinstein, A., & Kuhn, H. W. (1953). Theory of Games and Economic Behavior. Princeton, N.J. ; Woodstock: Princeton University Press.

Osborne, M. J., & Rubinstein, A. (1994). A course in game theory. MIT press.

Ramsey, F. (1931). Truth and probability. In R. Braithwaite (Ed.), The foundations of mathematics and other logical essays. London: Routledge.

Rasmusen, E. (2007). Games and information: An introduction to game theory (4th ed). Malden, MA ; Oxford: Blackwell Pub.

Savage, L. J. (1972). The foundations of statistics (2nd rev. ed). New York: Dover Publications.

Sen, A. (1973). Behaviour and the Concept of Preference. Economica, 40(159), 241–259. https://doi.org/10.2307/2552796

Sugden, R. (1991). Rational Choice: A Survey of Contributions from Economics and Philosophy. The Economic Journal, 101(407), 751–785. https://doi.org/10.2307/2233854

Tadelis, S. (2013). Game theory: An introduction. Princeton: Princeton University Press.