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International Encyclopedia of Statistical Science pp 346–349Cite as

Decision Theory: An Introduction

Decision theory (see also Decision Theory: An Overview) is the theory of rational decision making. This is an interdisciplinary field to which philosophers, economists, psychologists, computer scientists and statisticians contribute their expertise. It is common to distinguish between normative and descriptive decision theory. Normative decision theory seeks to yield prescriptions about what decision makers are rationally required – or ought – to do. Descriptive decision theories seek to explain and predict how people actually make decisions. Descriptive decision theory is thus an empirical discipline, which has its roots in experimental psychology. Descriptive and normative decision theory are, thus, two separate fields of inquiry, which may or may not be studied independently of each other.

In decision theory, a decision problem is situation in which a decision maker, (a person, a company, or a society) chooses what to do from a set of alternative acts, where the outcomeof the...

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References and Further Reading

  • Allais M (1953) Le comportement de l’homme rationnel devant le risque: critique des postulates et axiomes de l’ecole Américaine. Econometrica 21:503–546

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  • Arrow KJ (1951) Social choice and individual values, 2nd edn (1963). Wiley, New York

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  • Kahneman D, Tversky A (1979) Prospect theory: an analysis of decisions under risk. Econometrica 47:263–291

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  • Peterson M (2009) An introduction to decision theory. Cambridge University Press, Cambridge

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  • Ramsey FP (1926) Truth and Probability, Ramsey, 1931. In: Braithwaite RB (ed) The foundations of mathematics and other logical essays, Ch. VII. Kegan Paul, London, pp 156–198

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  • Savage LJ (1954) The foundations of statistics, 2nd edn (1972, Dover). Wiley, New York

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  • Trench, Trubner & Co., Harcourt, Brace and Company, New York

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  • von Neumann J, Morgenstern O (1947) Theory of games and economic behavior, 2nd edn. Princeton University Press (1st edn without utility theory)

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Authors and Affiliations

  1. Eindhoven University of Technology, Eindhoven, Netherlands

    Martin Peterson (Associate Professor)

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  1. Martin Peterson
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Editors and Affiliations

  1. Department of Statistics and Informatics, Faculty of Economics, University of Kragujevac, City of Kragujevac, Serbia

    Miodrag Lovric

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Peterson, M. (2011). Decision Theory: An Introduction. In: Lovric, M. (eds) International Encyclopedia of Statistical Science. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-04898-2_23

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