Decision Theory


Decision Theory
An interdisciplinary approach to determine how decisions are made given unknown variables and an uncertain decision environment framework. Decision theory bring together psychology, statistics, philosophy and mathematics to analyze the decision-making process. Decision theory is applied to a wide variety of areas such as game theory, auctions, evolution and marketing.

A common example of decision theory stems from the prisoner’s dilemma in which two individuals are faced with an uncertain decision where the final outcome is not only based on their personal decision, but also on that of the other individual. Since both parties do not know what actions the other person will take, this results in an uncertain decision framework.

While mathematics and statistical models determine what the optimal decision should be, psychology and philosophy introduce factors of human behaviors to suggest the most likely outcome.


Investment dictionary. . 2012.

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  • decision theory — Statistics. the theory of making decisions based on assigning probabilities to various factors and assigning numerical consequences to the outcome. [1960 65] * * * In statistics and related subfields of philosophy, the theory and method of… …   Universalium

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  • decision theory — noun : a branch of statistical theory that attempts to quantify the process of making choices between alternatives * * * deˈcision theory 7 [decision theory] noun uncountable (mathematics …   Useful english dictionary

  • decision theory — /dɪ sɪʒ(ə)n ˌθɪəri/ noun the mathematical methods for weighing the various factors in making decisions ● In practice it is difficult to apply decision theory to our planning. ● Students study decision theory to help them suggest strategies in… …   Marketing dictionary in english

  • decision theory — sprendimų teorija statusas T sritis automatika atitikmenys: angl. decision theory vok. Entscheidungstheorie, f rus. теория решений, f pranc. théorie des décisions, f …   Automatikos terminų žodynas

  • decision theory — noun the mathematical study of strategies for optimal decision making between options involving different risks or expectations of gain or loss depending on the outcome. Compare with game theory …   English new terms dictionary

  • decision theory — noun Date: 1961 a branch of statistical theory concerned with quantifying the process of making choices between alternatives …   New Collegiate Dictionary

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  • Info-gap decision theory — is a non probabilistic decision theory that seeks to optimize robustness to failure – or opportuneness for windfall – under severe uncertainty,[1][2] in particular applying sensitivity analysis of the stability radius type[3] to perturbations in… …   Wikipedia