Mark Dean

Topics in Microeconomics - Decision Theory and Evidence

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A course in decision theory and the related experimental evidence. Please email me if you spot any typos

INTRODUCTION:

Methodology: Lecture Notes. I expand on some of the points I make here in this presentation and this article (both of which are written for a neuroscience audience, but therefore try to make the point in a pretty simple and clear way). This article nicely captures the views of some proper decision theorists. If you are really keen this book covers a lot of the arguments we discussed in minute detail

UTILITY MAXIMIZATION:

Mathematical Preliminaries 1: Order Theory For more details on this topic, Efe Ok has a book "Elements of Order Theory" currently available for free online here (Scroll down until you can see it). The book has a lot more detail than we need, but chapter 1 and the interlude on the Axiom of Choice will be very useful.

Choice and Rationality: Choice, Revealed Preference and Utility. For more details on utility maximization and preferences, chapters 2 and 3 of the Kreps book are great. For the more advanced stuff, go back to Efe, and chapter 9 of the order theory book. The book Lecture Notes in Microeconomic Theory by Ariel Rubenstein is freely available for download and also has some great stuff.

Testing Rationality: The materiel I covered (very quickly) is here. For further materiel, Varian has a very nice survey. Three examples of revealed preference tests in practice are here, here and here

Stochastic and Random Utility: Most of the materiel I stole from Kim Border's fantastic lecture notes here. For the stuff on the Luce model, this recent article by Gul, Natenzon and Pesendorfer is very helpful

BOUNDED RATIONALITY AND OPTIMAL INFORMATION ACQUSITION:

The slides for the introductory lecture are here

Search and Satisficing: the slides are here, covering materiel drawn from two papers by Caplin and Dean and Caplin, Dean and Martin

The slides for the second lecture, covering a canonical model of optimal information acquisition are here, the materiel for which comes from this paper. Alternative approaches to a similar problem are provided here and here.

The slides for the third and fourth lectures on Shannon Entropy are here. For more information about working with Entropy costs, Cover and Thomas is a great resource (I have a copy if you would like to borrow it). Within economics, the Matejka and McKay paper is very helpful, as is this earlier paper by Sims, which takes a more macro perspective. An early version of my work with Andrew Caplin on the posterior based approach is here

CHOICE UNDER RISK:

We didn't really get to cover this materiel, but you may find these notes on expected utility useful, especially as they cover the mixture space axioms. Also, to fill in some techincal blanks, it might be useful to read these notes which provide a very basic introduction to measure theory.

TEMPTATION AND SELF CONTROL:

By way of background, you can read the introductory slides to the topic from my undergrad class here. The notes on preference for commitment are here. A more in-depth look at the decision theory of temptation and self control is given by this nice survey by Lipman and Pesendorfer. For more details of the proof of the representation theorem of Gul and Pesendorfer, look at the original article.

Presentation 1a and Presentation 1b: Due 3rd March

Presentation 2a and Presentation 2b: Due 17th March

Presentation 3: Due 21st April

Presentation 4a and Presentation 4b: Due 28th April

Department of Economics

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