Introduction to decision theory

Introduction to Decision Theory (6 credits – 42h.)

Fall – A.Y. 2019-20

Prof. Pierre Dehez – Prof. Pier Mario Pacini



The course is meant to introduce the student to the basic theoretical apparatus of Decision Theory: individual decisions and strategic decisions, both in a non-cooperative and cooperative framework. The course intends to provide the main tools and concepts to interpret many economic and social phenomena stemming out of individual and/or group strategic interaction and allow the student to deal with concepts as individual and group/social rationality, efficiency, equity, power. The course is tailored for a wide public of students both in economics and in social sciences; the mathematical tools are kept at the very basic level, but some knowledge of probability theory and of the methods and concepts introduced in a basic course in Microeconomics are highly advised.

–          Individual decisions: the basic tools required to represent individual choices in different information context are presented

o   Basic ingredients of decision theory: alternatives; constraints; objectives.

o   Choices under certainty: preferences and utility; choice.

o   Choices under ignorance: contingent results, maxmin, minmax and mixed rules.

o   Choices under uncertainty; lotteries, Von Neuman-Morgestern Expected utility.


–          Non cooperative games: the basic notions required to represent and analyse situations of strategic interaction are introduced, together with the main solution concepts:

o   Basic ingredients of non-cooperative game theoretic situations.

o   Representing games:

  • the extensive form and backward induction;
  • strategic (or normal) form. Strategies: pure/mixed, dominant/dominated, conservative, best response, rationalizability.

o   Nash equilibrium: unicity, multiplicity, absence of equilibria in pure strategies, efficiency. Repeating a game.


–          Bargaining: a bargaining situation between two parties will be introduced and analysed together with main solution concepts:

o   Bargaining with non transferable utilities.

o   The “Nash bargaining” axiomatization and solution.

o   Other solution concepts.


–          Cooperative games (in coalitional form): the basic notion of a characteristic function will be introduced together with key solution concepts, mainly the “core” and “Shapley” value

o   Representation of cooperative games and its properties.

o   Imputations.

o   Stable allocations: the “core” of a cooperative game.

o   The “Shapley” value.

o   Applications.

Main reading list

Ø  Dehez, Pierre (2017). Theorie des Jeux – Conflict, Négociation, Cooperation et Pouvir. Economica, Paris.

Ø  Resnik Michael (1987). Choices: An Introduction to Decision Theory. University of Minnesota Press, Minneapolis.



Further suggested readings


  • Maschler Michael, Eilon Solan and Schmuel Zamir (2013). Game theory, Cambridge University Press, Cambridge MA.
  • Moulin Hervé (1995). Cooperative Microeconomics. Princeton University Press, Princeton.
  • Myerson Roger (1991). Game theory, analysis of conflict, Harvard University Press, Cambridge MA.
  • Osborne Martin (2009). An introduction to game theory, Oxford University Press, Oxford.
  • Rubinstein Ariel and Martin Osborne (1994). A course in game theory, MIT Press, Cambridge MA (see: