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In this lecture we consider decision theory, an attempt to provide a mathematical characterisation of rational behaviour.


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

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

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.

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

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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).


Hargreaves-Heap, S., & Varoufakis, Y. (2004). Game theory: A critical introduction. London: Routledge. Retrieved from
Jeffrey, R. C. (1983). The logic of decision, second edition. Chicago: University of Chicago Press.
Ramsey, F. (1931). Truth and probability. In R. Braithwaite (Ed.), The foundations of mathematics and other logical essays. London: Routledge.
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.
Sugden, R. (1991). Rational Choice: A Survey of Contributions from Economics and Philosophy. The Economic Journal, 101(407), 751–785.