Decision Theory

Expected utility, prospect theory, ambiguity, sequential and group decision-making.
TUTORIALS

Decision Theory

Expected utility, prospect theory, ambiguity, sequential and group decision-making.

The Allais paradox and expected utility violations

decision-theory
allais-paradox
expected-utility
prospect-theory

Demonstrate the Allais paradox as a systematic violation of the independence axiom in expected utility theory, implement EU calculations in R, and explore prospect theory’s probability weighting as an explanation.

May 8, 2026

Ambiguity aversion and the Ellsberg paradox

decision-theory
ambiguity-aversion
ellsberg-paradox
maxmin-expected-utility

Implement the Ellsberg urn experiment in R, model ambiguity aversion using maxmin expected utility and alpha-MEU, and show how ambiguity affects strategic decisions and games with unknown opponent types.

May 8, 2026

Expected Utility Theory: The Axiomatic Foundations

decision-theory
expected-utility
risk-aversion
axioms

Implementing the von Neumann-Morgenstern axioms in R, verifying them with lottery objects, demonstrating the Allais and Ellsberg paradoxes, and calibrating CRRA and CARA utility functions via MLE.

May 8, 2026

Expected utility theory and the von Neumann–Morgenstern axioms

decision-theory
expected-utility
vnm-axioms
risk-aversion

Derive expected utility from the VNM axioms in R, demonstrate the representation theorem with numerical examples, and visualize risk attitudes through utility function curvature.

May 8, 2026

Reference dependence and loss aversion in games — how prospect theory reshapes equilibria

decision-theory
prospect-theory
loss-aversion
reference-dependence

Recompute Nash equilibria when players evaluate payoffs through prospect theory’s lens of reference dependence and loss aversion, and visualize how equilibrium structure shifts in the Stag Hunt as loss aversion varies.

May 8, 2026

Savage’s Subjective Expected Utility: From Axioms to Beliefs

decision-theory
subjective-probability

Implement Savage’s seven axioms of subjective expected utility, derive subjective probabilities from revealed preferences, and demonstrate the Ellsberg paradox as a violation of the sure-thing principle.

May 8, 2026
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