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
Arrow KJ (1951) Social choice and individual values, 2nd edn (1963). Wiley, New York
Kahneman D, Tversky A (1979) Prospect theory: an analysis of decisions under risk. Econometrica 47:263–291
Peterson M (2009) An introduction to decision theory. Cambridge University Press, Cambridge
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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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