DECISION AND UNCERTAINTY
DECISION AND UNCERTAINTY
Academic year 2023/2024
- Course ID
- Paolo Ghirardato (Lecturer)
Daniele Pennesi (Lecturer)
- Degree course
- Insurance and Statistics
- 2nd year
- Teaching period
- First semester
- Related or integrative
- Course disciplinary sector (SSD)
- SECS-S/06 - mathematical methods of economy, finance and actuarial sciences
- Formal authority
- Type of examination
Sommario del corso
Course objectivesThis is a course which introduces students to the formalization and analysis of decision making both in a single-person environment. While the course's emphasis is on theoretical issues, specific attention is given to the application of the concepts developed in class to economic and financial problems.
Results of learning outcomesAt the end of the course, the student is expected to be capable of:
-using the basic tools and results to pose, formalize and analyse a single-person or multi-person decision problem
-knowing the extent to which the results obtained in the previous step are dependent on the assumption that s/he has made about the preferences, information and behavior of actors in the problem
-knowing therefore the extent to which the results are robust to different assumptions on preferences, information and behavior
-being able to think about possible and useful generalizations of the posited model(s)
-being able to communicate such findings using appropriate and clear mathematical notation and language
-Introduction and overview of decision models.
-Decision analysis in action: Your decision problem
-Choice under certainty: Relations and revealed preferences
-Known probabilities: The Expected Utility Model
-Subjective probability: The Subjective Expected Utility model (Anscombe-Aumann and Savage)
-Non-expected utility models: The Allais and Ellsberg paradoxes and their rationalizations
-Dynamic choice: basic concepts
-Choice over time with no uncertainty
-Choice over time with uncertainty
Course deliveryThe course-work is articulated in 48 hours of formal lecture time, and in at least as many hours of at-home work solving practical exercises.
The course schedule (with venues) is the following:
- THURSDAYS 10:15-13:15, Aula Corradetti
- FRIDAYS 8:15-10:15, Aula Corradetti
Paolo Ghirardato will be delivering the first 32-35 hours (up to non-expected utility models), and Daniele Pennesi the remaining hours.
Learning assessment methodsGeneralities:
The course grade is determined solely on the basis of written examinations. The objective of the examination is to test the student's ability to do the following:
1) Present briefly the main ideas, concepts and results developed in the course, also explaining intuitively the meaning and scope of the definitions and the arguments behind the validity of the results
2) Use effectively the concepts and the result to answer questions in Economics and related areas --e.g., using a specific decision model to make a policy prescription.
There are 5 possible exam sessions in each academic year. The first session takes place during the first semester (while the course is being taught), and it is articulated in a midterm administered in early November and and a final exam administered in early December. The remaining four sessions (from January until September) comprise a single comprehensive examination. The details for each type of examination are provided below.
Midterm+Final (November+December): Each of the two exams lasts 90 minutes, and it is articulated in 2 questions. Some of the questions have an essay part, and some of the questions also have a more practical ("exercise") part. Each question is scored between 20 and 40 points, and the maximum score for the exam is typically 60. There is no minimum score in the midterm for admisssion to the final exam. Once both exams are graded, the final score in 120ths is computed, and it is transformed into 30ths, taking also into account the general class performance in the two exams (i.e, giving some weight to relative, as well as absolute performance).
Comprehensive examinations (4 sessions between June and February): Each exam lasts 165 minutes, and it is typically articulated in 4 questions. Some of the questions have an essay part, and some of the questions also have a more practical ("exercise") part. Each question is scored between 20 and 40 points, and the maximum score for the exam is typically 120. The final score in 120ths is computed, and it is transformed into 30ths, taking also into account the general class performance in the two exams (i.e, giving some weight to relative, as well as absolute performance).
Support activitiesWeekly homework sets will be assigned (to be found on the course web page, see the URL in the "Note" below), and their solution will be posted and discussed in class.
Suggested readings and bibliography
Please, find this information on the course's official web page:
For further details, please consult the course's official web page:
Courses that borrow this teaching