Abstract:

This course focuses on axiomatic models of decision theory, presenting the mathematical properties of preferences that characterize (some of) the most popular behavioral models in economics. The course will be structured as follows: After quickly reviewing deterministic utility theory and utility theory under risk, I will introduce the concepts of probabilistic uncertainty and the subjective expected utility model of Savage. Using Ellsberg's paradox, I will demonstrate that probability alone is insufficient to model certain types of decisions and will introduce the concept of ambiguity. Finally, I will present some of the most widely used models in the literature for dealing with decisions under ambiguity, such as the Choquet expected utility model, the maxmin expected utility model, and the smooth ambiguity model.

Location:

CEPS, ENS Paris-Saclay, room 2E29
4, avenue des Sciences, 91190, Gif-sur-Yvette