Efrem Bonfiglioli

The classical approach to decision theory builds on a three step iterative process: decision-makers assign probabilities to different possible outcomes, they generate welfare estimates depending upon the different outcomes (relative costs and benefits) for the decision makers involved, and they calculate the expected values of different contingencies. The process is iterative in the sense that decision-makers reassess probabilities as they gain more information (it is Bayesian), they also make assessments as they learn more about the welfare implications for other important actors (it is game-theoretical), and they learn more about their own possibilities to control events (it is causal). The purpose of this course is to introduce students to the quantitative techniques used in each stage of this process. The course begins by exploring the assignment of probabilities both on the basis of prior assumptions and using more advanced techniques (like Monte Carlo simulations). It then shows how these probabilities can be updated in a Bayesian manner as a result of new information. It looks at how these probabilities can be fed into decision making with multiple actors (through game theory). And it concludes with techniques to evaluate the overall success of the decision-making process. Students will need basic statistics and principles of economics in order to get the most out of this course. Basic skills using spreadsheets would also be of use. The course will provide introductory information about simulation modelling.