Economic theories of decision making: orthodoxy and beyond – 2016



Instructor 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, nonorthodox 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 a week before class as a Word file, and have to return them to by midnight of the day before class.


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

Evaluation depends on three factors: WarmUps (30%), written exam (35%), paper (35%). Written exam: questions about the course’s topic; duration: 60 minutes; date: to be decided. Paper: a paper of 5,000 words at maximum; topic: to be agreed upon with the instructor; delivery date for the paper: 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, Department of Economics, Via Monte Generoso 71, first floor.

  1. Class #1: January 13, 2016, 10-13
    Historical introduction to the economic theory of decision-making
    Reading materials:

    • Moscati, I. 2012. From Classical Political Economy to Behavioral Economics, Milan: Egea, chapters 2-4, and 10-11.
  2. Class #2: January 20, 2016, 10-13
    Decision-making in riskless situations
    Reading materials:

    • Mas-Colell, A., Whinston, M.D., & Green, J.R. 1995. Microeconomic Theory, Oxford UP, chapters 1 and 3.
    • Moscati, I., & 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.
  3. Class #3: January 27, 2016, 10-13
    Decision-making in risky situations. Part I: Expected Utility Theory
    Reading materials:

    • Mas-Colell, A., Whinston, M.D., and Green, J.R. 1995. Microeconomic Theory, Oxford UP, chapter 6.
    • Moscati, I. 2015. How Economists Came to Accept Expected Utility Theory. The Case of Samuelson, working paper.
  4. Class #4: February 3, 2016, 10-13
    Decision-making in risky situations. Part II: Beyond Expected Utility Theory
    Reading materials:

    • Gilboa, I. 2009. Theory of Decision under Uncertainty, Cambridge UP, chapters 15-17.
    • Kahneman, D., & Tversky, A. 1979. Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47: 263-292.
    • Barberis, N.C. 2013. Thirty Years of Prospect Theory in Economics. Journal of Economic Perspectives, 27: 173-96.
  5. Class #5: February 10, 2016, 14-17
    Bounded-Rationality Models
    Reading materials:

    • Grüne-Yanoff, T., Marchionni, C., & Moscati, I. 2014. Introduction: Methodologies of Bounded Rationality, Journal of Economic Methodology, 21: 325-42.
    • Gigerenzer, G., & Selten, R. (eds.). 2001. Bounded Rationality. The Adaptive Toolbox, MIT Press, chapters 1-3.
    • Manzini, P., & Mariotti, M. 2007. Sequentially Rationalizable Choice, American Economic Review, 97: 1824-39.