Decision theory in economics

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, psychology

Psychology

Psychology is the study of the mind and behavior. Its immediate goal is to understand individuals and groups by both establishing general principles and researching specific cases. For many, the ultimate goal of psychology is to benefit society...

, philosophy

Philosophy

Philosophy is the study of general and fundamental problems, such as those connected with existence, knowledge, values, reason, mind, and language. Philosophy is distinguished from other ways of addressing such problems by its critical, generally systematic approach and its reliance on rational...

, mathematics

Mathematics

Mathematics is the study of quantity, space, structure, and change. Mathematicians seek out patterns and formulate new conjectures. Mathematicians resolve the truth or falsity of conjectures by mathematical proofs, which are arguments sufficient to convince other mathematicians of their validity...

, and statistics

Statistics

Statistics is the study of the collection, organization, analysis, and interpretation of data. It deals with all aspects of this, including the planning of data collection in terms of the design of surveys and experiments....

 is concerned with identifying the value

Value

Value or values may refer to:Concepts of worth:* Value theory – overview of approaches in various disciplines* Value ** Value * Value ** Theory of value ** Value investing...

s, uncertainties

Uncertainty

Uncertainty is a term used in subtly different ways in a number of fields, including physics, philosophy, statistics, economics, finance, insurance, psychology, sociology, engineering, and information science...

 and other issues relevant in a given decision

Decision making

Decision making can be regarded as the mental processes resulting in the selection of a course of action among several alternative scenarios. Every decision making process produces a final choice. The output can be an action or an opinion of choice.- Overview :Human performance in decision terms...

, its rationality, and the resulting optimal decision

Optimal decision

An optimal decision is a decision such that no other available decision options will lead to a better outcome. It is an important concept in decision theory. In order to compare the different decision outcomes, one commonly assigns a relative utility to each of them...

. It is closely related to the field of game theory

Game theory

Game theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...

 as to interactions of agents

Agent (economics)

In economics, an agent is an actor and decision maker in a model. Typically, every agent makes decisions by solving a well or ill defined optimization/choice problem. The term agent can also be seen as equivalent to player in game theory....

 with at least partially conflicting interests whose decisions affect each other.
Most of decision theory is normative

Norm (philosophy)

Norms are concepts of practical import, oriented to effecting an action, rather than conceptual abstractions that describe, explain, and express. Normative sentences imply “ought-to” types of statements and assertions, in distinction to sentences that provide “is” types of statements and assertions...

 or prescriptive, i.e., it is concerned with identifying the best decision to take (in practice, there are situations in which "best" is not necessarily the maximal (optimum may also include values in addition to maximum), but within a specific or approximative range), assuming an ideal decision maker who is fully informed, able to compute with perfect accuracy, and fully rational

Rationality

In philosophy, rationality is the exercise of reason. It is the manner in which people derive conclusions when considering things deliberately. It also refers to the conformity of one's beliefs with one's reasons for belief, or with one's actions with one's reasons for action...

.