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How (Not) to Do Decision Theory

  • 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)

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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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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