Logic and decision making - Prof. Raffaele Mascella - a.a. 2016/2017
INFO ABOUT THE COURSE
The course provides an introduction to decision making, both normative and descriptive. Among the primary purposes, the course is intended to provide a set of basic tools that help the student solve decision problems through quantitative models and translate qualitative uncertainty into numbers. A substantial amount of the course deals with normative decision theory, i.e. the study of how to make rational decisions, but the last part deals also with descriptive decision making, i.e. the study of how actually humans make decisions. Examples are used heavily.
The course is divided in 3 units (Individual Decision Theory; Game theory and Social Decision Theory; Descriptive Decision Theory) and worths 6 CFU, which means that an average student is expected to require 150 hours of work to complete and pass the course.
OBJECTIVES OF THE COURSE
- Knowledge and understanding: Know and understand the most common decision analysis techniques for rational decision making, with and without uncertainty and risk, for individuals and groups; furthermore, know and understand main heuristics and fallacies in decision-making.
- Applying knowledge and understanding: Ability to analyze and solve decision problems under certainty, uncertainty and risk, with one or more attributes; ability to think strategically in competitive scenarios.
- Making judgements: Increase critical thinking skills and autonomy in reasoning, and in problem solving decisions.
- Communication: Ability to communicate clearly rational elements and empirical aspects that characterize decisions, either to an expert or to a non-expert audience.
- Learning skills: Ability to learn further strategies, theories and models of decision making.
PREREQUISITE AND PREPARATORY
- Prerequisite: No philosophical prerequisites are required. No mathematical prerequisites are necessary beyond high school algebra and arithmetic. It is required only some familiarity with basic inferences in propositional logic.
- Preparatory: None.
- Tuesday hour 10.30 - classroom 5
- Thursday hour 10.30 - classroom 5
An Introduction to Decision Theory
- Author: M. Peterson
- Edition: Cambridge University Press, 2009, Cambridge
- chapters: all, except 9.
Decision Analysis for Management Judgment (3rd ed.)
- Author: P. Goodwin, G. Wright
- Edition: John Wiley & Sons, 2004, New York
- chapters: 3, 5, 8, and 12
Judgment in Managerial Decision Making (7th ed.)
- Author: M.H. Bazerman, D.A. Moore
- Edition: John Wiley & Sons, 2009, New York
- chapters: 1, 2, 3, 4, 6 (only the first paragraph) and 11
- Notes on Basic Logic
- Notes on MAUT
Make Better Decisions (Article)
- Author: T. H. Davenport
- Review: Harvard Business Review, November 2009
- Online: follow this link
The Evolution of Decision Making: How Leading Organizations Are Adopting a Data-Driven Culture (Survey)
- Author: HBR Analytic Services
- Online: follow this link
Predictably Irrational (Book)
- Author: D. Ariely
- Edition: Harper Collins, 2008, New York
Smart Choices (Book)
- Author: J.S. Hammond, R.L. Keeney, H. Raiffa
- Edition: Harvard Business School Press, 1999, Boston
Two intermediate written exams are planned: the first at the end of Unit 1, the second at the end of Unit 3.
Homeworks are scheduled and each student, individually or in couple, must work on a more complex project and present it at the end of the course.
The course is graded on the basis of practical assignments and written exams. The student is expected to have knowledge of, insight in, and, most importantly, understanding of the different course subjects. This also means that the student have practiced with applying different methods and procedures and can correctly do so in little time. Active participation is also taken into account.
During the Course semester office hours are: Wednesday, from 3.30 to 5.30 pm. Anyway, you should feel free to come by my office at any time. I have, either with an appointment or without. I spend most Tuesdays, Wednesdays, and Thursday in and around my office, so your chances of finding me on one of those days should be reasonably high; and although in some cases I may have to ask you to come back at another time, in general I will be happy to speak to you at your convenience.
At the end of the semester office hours are: Wednesday, from 3.30 to 4.30 pm, or by appointment. Please, send me an email to arrange a time.
Students not attending at least 80% of the lessons are considered "non-attending students" for this course.
The examination of non-attending students consists of:
- a compulsory written exam covering the entire course's material (theory and exercises)
- an analysis of a multi-criteria decision problem, to be handed in and presented the same day
- an oral exam concerning the entire course's material and the project presented.
Key Dates and Assignments
Schedule (revised, 1st Nov. 2016)
Tue 20/9: Entry test. Course introduction (Lessons, Exams, Projects, Objectives).
Thu 22/9: Course introduction. Basic Logic. Introduction to Decision Theory.
- Materials: Notes on Basic Logic; Bazerman, chap 1 (only par. 1-3, pp. 1-6); Peterson, chap 1 and 2.
Before attending next lesson: watch the movie “Moneyball. The Art of Winning an Unfair Game”
Tue 27/9: Discussion on “Moneyball”. Decisions under uncertainty.
- Materials: Peterson, chap 3; Goodwin, chap 5 (par 1 and 2).
Thu 29/9: Decisions under risk. Paradoxes.
- Materials: Peterson, chap 4; Goodwin, chap 5 (par 3 and 4).
Tue 4/10: Decisions under risk. Utility.
- Materials: Peterson, chap 5; Goodwin, chap 5 (par 5, 6, 7, and 9).
Thu 6/10: Multi-attribute decisions under certainty (SMART method)
- Materials: Goodwin, chap 3 (par 1-11, until "Conflicts between intuitive and analytic results", or p. 27-53),
Tue 11/10: Multi-attribute utility theory. Multi-attribute decisions under risk.
- Materials: Notes on MAUT; Goodwin, chap 5 (par 11 "Multi-attribute utility").
Before attending next lesson: watch the movie “21”
Thu 13/10: Discussion on “21”. Mathematics and Philosophy of Probability. Bayes theorem.
- Materials: Peterson, chap 6 and 7.
Mon 17/10: Homework 1 due.
Tue 25/10: The value of information.
- Materials: Goodwin, chap. 8.
Thu 27/10: The rationality of utility, preference axioms, Bayesianism. (CANCELED).
Peterson, chap 8 and 10; Goodwin chap 5 (par 10 "How useful is utility in practice"). Thu 3/11: Midterm exam (unit 1). (CANCELED)
Tue 8/11: Midterm exam (unit 1).
Thu 10/11: Introduction to Game theory. The prisoner dilemma.
- Materials: Peterson, chap 11.
Mon 14/11: Homework 2 - case analysis due.
Tue 15/11: Mixed strategies. The battle of sexes.
- Materials: Peterson, chap 12.
Thu 17/11: The Bargaining problem. Evolution and Ethics.
- Materials: Peterson, chap 12.
Mon 21/11: Homework 2 - peer review due.
Tue 22/11: Seminar.
Thu 24/11: Social choice theory. Decisions involving groups of individuals.
- Materials: Peterson, chap 13. Goodwin, chap 12.
Before attending next lesson: watch the documentary from BBC Horizon "How you really make decisions".
Tue 29/11: Common Biases and Heuristics.
- Materials: Peterson, chap 14; Bazerman, chap 1, 2 and 3.
Wed 30/11, 10.30 am: Resit exam.
Thu 1/12: Seminar.Tue 6/12: Bounded Awareness. Framing and the Reversal of Preferences.
- Materials: Peterson, chap 13; Bazerman, chap 4.
Before attending next lesson: watch the documentary "How to Make Better Decisions" (from BBC Horizon)
Mon 12/12: Homework 3 due.
Tue 13/12: The Escalation of Commitment. Improving Decision Making.
- Materials: Bazerman, chap 6 and 11.
Thu 15/12: Final exam (unit 2 and 3).
Mon 9/1: Homework 4 - decision analysis due.
Tue 10/1: Homework 4 - presentations due (NB: hand in also printed copies).
Thu 12/1: Homework 4 - presentations due (NB: hand in also printed copies).
Entry test, slides and notes
Suggested multimedia contents
Movie "Moneyball. The Art of Winning an Unfair Game". Here is a little excerpt:
Movie "21". Here is a little excerpt:
Documentary from BBC Horizon "How you really make decisions". Here is the full episode:
Documentary from BBC Horizon. Here is just an excerpt: