Economic theories of decision making: orthodoxy and beyond – 2017




Prof. Ivan Moscati.



Office hours: by appointment.



The course familiarizes students with the main theories of decision-making used in economics. The focus is on theories of individual decision-making in risk-free and risky contexts (neither collective decisions related to social welfare, nor strategic decisions, i.e. game theory, are covered). After a historical introduction to the subject (class 1), the orthodox theory of decision-making in riskless and risky contexts is presented (classes 2 and 3). The last two classes (4 and 5) focus on more recent, non- orthodox approaches to decision making.


Class format and WarmUp assignments

The class format takes advantage of some ideas from the JiTT learning strategy. Students prepare for each class by reading in advance the reading materials for that class (see the schedule below), and by completing WarmUp assignments. WarmUps are short assignments, typically questions to be answered, designed to prompt students to think about the upcoming lesson. Students will receive the WarmUps at least a week before class as a Word file, and have to return them to by 4 pm of the day before class.



There are only three grades for this course: failure; pass; pass with distinction.

Evaluation depends on two factors: WarmUps (35%), written exam (65%).

Written exam: questions about the course’s topic; duration: 90 minutes; date: to be decided.


Reading materials

The relevant articles and papers are posted in a Dropbox file you will be invited to. The relevant books can be found at the university library (, or can be bought in the internet (;



All meetings will take place in the seminar room (aula seminari) or council room (sala consiglio), Department of Economics, Via Monte Generoso 71, first floor.





Historical introduction to the economic theory of decision-making

Reading materials:

  • Moscati, 2012. From Classical Political Economy to Behavioral Economics, Milan: Egea, chapters 2-4, and 10-11.



Decision-making in riskless situations: rational choice theory

Reading materials:

  • Mas-Colell, , Whinston, M.D., & Green, J.R. 1995. Microeconomic Theory, Oxford UP, chapters 1-3.
  • Moscati, , & Tubaro, P. 2011. Becker Random Behavior and the As-If Defense of Rational Choice Theory in Demand Analysis, Journal of Economic Methodology, 18: 107–128.



Decision-making in riskless situations: bounded-rationality models

Reading materials:

  • Grüne-Yanoff, , Marchionni, C., & Moscati, I. 2014. Introduction: Methodologies of Bounded Rationality, Journal of Economic Methodology, 21: 325-42.
  • Manzini, , & Mariotti, M. 2007. Sequentially Rationalizable Choice, American Economic Review, 97: 1824-39.



Decision-making in risky situations: expected utility theory

Reading materials:

  • Moscati, 2016. How Economists Came to Accept Expected Utility Theory: The Case of Samuelson and Savage, Journal of Economic Perspectives, 30: 219–236.
  • Mas-Colell, , Whinston, M.D., and Green, J.R. 1995. Microeconomic Theory, Oxford UP, chapter 6.
  • Moscati, 2016. Measuring the Economizing Mind in the 1940s and 1950s: The Mosteller-Nogee and Davidson-Suppes-Siegel Experiments to Measure the Utility of Money, History of Political Economy, 48 (5): 239-269.



Decision-making in risky situations: prospect theory

Reading materials:

  • Kahneman, , & Tversky, A. 1979. Prospect Theory: An Analysis of Decision under Risk, Econometrica, 47: 263-292
  • Tversky, A, & Kahneman, 1992. Advances in Prospect Theory: Cumulative Representation of Uncertainty, Journal of Risk and Uncertainty, 5: 297-323.
  • Barberis, C. 2013. Thirty Years of Prospect Theory in Economics. Journal of Economic Perspectives, 27: 173-96.