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Constructive Decision Theory

Author

Listed:
  • Blume, Lawrence

    (Department of Economics, Cornell University, Ithaca, USA)

  • Easley, David

    (Department of Economics, Cornell University, Ithaca, USA)

  • Halpern, Joseph Y.

    (Department of Computer Science, Cornell University, Ithaca, USA)

Abstract

Contemporary approaches to decision making describe a decision problem by sets of states and outcomes, and a rich set of acts: functions from states to outcomes over which the decision maker (DM) has preferences. Real problems do not come so equipped. It is often unclear what the state and outcome spaces would be. We present an alternative foundation for decision making, in which the primitive objects of choice are syntactic programs. We show that if the DM's preference relation on objects of choice satisfies appropriate axioms, then we can find states, outcomes, and an embedding of the programs into Savage acts such that preferences can be represented by EU in the Savage framework. A modeler can test for SEU behavior without having access to the subjective states and outcomes. We illustrate the power of our approach by showing that it can represent DMs who are subject to framing effects.

Suggested Citation

  • Blume, Lawrence & Easley, David & Halpern, Joseph Y., 2009. "Constructive Decision Theory," Economics Series 246, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihsesp:246
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    File URL: https://irihs.ihs.ac.at/id/eprint/1963
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    References listed on IDEAS

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    Cited by:

    1. Agastya, Murali & Slinko, Arkadii, 2015. "Dynamic choice in a complex world," Journal of Economic Theory, Elsevier, vol. 158(PA), pages 232-258.
    2. Burkhard Schipper, 2013. "Awareness-dependent subjective expected utility," International Journal of Game Theory, Springer;Game Theory Society, vol. 42(3), pages 725-753, August.
    3. Burkhard Schipper, 2010. "Revealed Unawareness," Working Papers 303, University of California, Davis, Department of Economics.
    4. Alon, Shiri & Lehrer, Ehud, 2014. "Subjective multi-prior probability: A representation of a partial likelihood relation," Journal of Economic Theory, Elsevier, vol. 151(C), pages 476-492.
    5. Piermont, Evan, 2017. "Introspective unawareness and observable choice," Games and Economic Behavior, Elsevier, vol. 106(C), pages 134-152.
    6. Ekaterina Svetlova & Henk van Elst, 2012. "How is non-knowledge represented in economic theory?," Papers 1209.2204, arXiv.org.

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    More about this item

    Keywords

    Decision theory; subjective expected utility; behavioral anomalies;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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