This is an advanced level theory course for research-career oriented master students (research master) and PhD students at Helsinki Graduate School of Economics (Aalto University & Hanken & University of Helsinki). The course studies individual economic decision making from the perspective of formal mathematical decision theory which is a very central building block of microeconomic theory. It rigorously defines the concepts of consistent choice, rational preferences, utility maximization, and studies their connections. It applies these concepts to the rational theory of consumer choice and studies its implications for observed choice patterns. The formal toolkit of decision theory is also extended and applied to model decision making under uncertainty. The concept of risk preference is defined and studied. Theoretical implications for the predicted choice patterns are studied. The participants also participate decision making experiments. They examine experimental and observational data to understand to which extent observed data complies with the predictions of the theories, and how models can be extended to allow for better explaining the data at a cost of making the theory more complex.
Doctoral students can also take this course.
You have the knowledge of basic concepts and results in decision theory and the skills to derive basic mathematical proofs of theorerical results. You are familiar with and understand the role of simplifying rationality assupmtions in economic theory and economics, how explanatory power can be improved by relaxing these, and how there is a trade-off between simplicity of the model and its capacity to explain data. You have the capacity to understand how theoretical results relate to empirical (and experimental) patterns.
|After completing the course, you will be able to
- recognize the basic concepts and results in decision theory
- read and follow academic research journal articles at the international reserach frontier
- derive basic mathematical proofs of theorerical results using methods of proof by induction and contradiction, for instance
- critically evaluate the role of simplifying rationality assupmtions in economic theory and economics, how explanatory power can be improved by relaxing these, and how there is a trade-off between simplicity of the model and its capacity to explain data
- apply theoretical constructs and results to interpret empirical (and experimental) patterns and findings, and recognize their potential implications for the advancement of theory.
|International Learning Experience
This course meets the general international standards for a graduate level course in decison theory in the first-year microeconomics sequence of master / PhD studies in European and US academic institutions. This applies to central course syllabus and readings.
Highly recommended: broad bachelor level major studies in economics, especially intermediate microeconomics.
|Collaboration with the Business World
The students apply their theoretical knowledge to a consumer choice problem on an internet consumer platform. They are asked to relate the theories to some patterns observed in some actual online marketing settings. They are also asked to appy the theory of decision making under risk to some investment settings.
|Total Student Workload
134 hours divided into
Scheduled (contact) hours: 36 h
Non scheduled work: 98 h
24 hours of lectures
8 hours of excercises
4-hour written exam
(4-hour retake exam)
- 24 hours of lectures
- 8 hours of excercise lectures
- 4-hour written exam 19.10.2020
- (4-hour retake exam) 8.12.2020
- 4 pen-and-paper problem sets for which answers must be answers must be handed in prior to excercise lectures
- more applied take home problem set
|Literature and Course Material
- Mas-Colell, A., Whinston, M. D. & Green, J. R. (1995). Microeconomic theory. Chapters 1-6. New York: Oxford University Press.
- Rubinstein, A. (2012). Lecture notes in microeconomic theory: The economic agent (second edition.). Princeton, N.J.: Princeton University Press. (Free electronic copy available on Rubinstein's website).
- Chambers, C. P., Echenique, F. & Cambridge University Press. (2016). Revealed preference theory. Cambridge: Cambridge University Press.
Written exam (100% or 80% depending on whether the more applied take home problem set counts)
4 pen and paper exercise sets to hand in (obligatory requirement)
Online decison-making experiments (obligatory requirement)
More applied take home problem set (weights 20% to course grade if well-done but cannot influence grade negatively)
Hanken degree students within the Economics Research master track and Hanken doctoral degree students in Economics only. PhD students in Finance or very ambitious and advanced QTEM or other master-level exchange students are also welcome.
|Recommended Time of Performance
First year of master level studies on a research master track (research-career-oriented master students) or first year of studies of a PhD.
All the lectures are given in the first floor seminar rooms, Economicum-building, Arkadiankatu 7
Exams are held in the same location on Oct 19th and Dec 8th.