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How (Not) to Do Decision Theory

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  • Eddie Dekel
  • Barton L. Lipman

    ()
    (Economics Department, Northwestern University, Evanston, Illinois 60208, and School of Economics, Tel Aviv University, Tel Aviv, 69978 Israel
    Department of Economics, Boston University, Boston, Massachusetts 02215)

Abstract

We discuss the goals and means of positive decision theory and the implications for how to do decision theory. We argue that the goal of positive economic theory generally is to provide predictions and understanding and that representation theorems and other results of decision theory should be seen as ways to achieve these goals. We also argue that the interpretation of a model is relevant to whether and how we use the model, that psychological considerations are not necessary for useful decision theory but can be helpful, and that nonchoice data, interpreted properly, can be valuable in predicting choice and therefore should not be ignored.

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Bibliographic Info

Article provided by Annual Reviews in its journal Annual Review of Economics.

Volume (Year): 2 (2010)
Issue (Month): 1 (09)
Pages: 257-282

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Handle: RePEc:anr:reveco:v:2:y:2010:p:257-282

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Keywords: choice theory; axioms; representations;

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Cited by:
  1. David Dillenberger & Andrew Postlewaite & Kareen Rozen, 2011. "Optimism and Pessimism with Expected Utility, Third Version," PIER Working Paper Archive 13-001, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 26 Dec 2012.
  2. Stefania Minardi & Andrei Savochkin, 2013. "Preferences With Grades of Indecisiveness," Carlo Alberto Notebooks 309, Collegio Carlo Alberto.
  3. Spiegler, Ran, 2011. "‘But Can'T We Get The Same Thing With A Standard Model?’ Rationalizing Bounded-Rationality Models," Economics and Philosophy, Cambridge University Press, vol. 27(01), pages 23-43, March.
  4. Rohan Dutta & Sean Horan, 2013. "Inferring Rationales from Choice : Identification for Rational Shortlist Methods," Cahiers de recherche 09-2013, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  5. David Dillenberger & Andrew Postlewaite & Kareen Rozen, 2011. "Optimism and Pessimism with Expected Utility, Fourth Version," PIER Working Paper Archive 13-068, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Nov 2013.

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