Decision theory

Article By:

Sage, Andrew P. School of Information Technology and Engineering, George Mason University, Fairfax, Virginia.

Last reviewed:January 2020

DOI:https://doi.org/10.1036/1097-8542.182500

A broad range of concepts which have been developed to both describe and prescribe the process of decision making, where a choice is made from a finite set of possible alternatives. Normative decision theory describes how decisions should be made in order to accommodate a set of axioms believed to be desirable; descriptive decision theory deals with how people actually make decisions; and prescriptive decision theory formulates how decisions should be made in realistic settings. Thus, this field of study involves people from various disciplines: behavioral and social scientists and psychologists who generally attempt to discover elaborate descriptive models of the decision process of real humans in real settings; mathematicians and economists who are concerned with the axiomatic or normative theory of decisions; and engineers and managers who may be concerned with sophisticated prescriptive decision-making procedures.

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