Decision theory (or thetheory of choice) is the study of anagent's choices. Decision theory can be broken into two branches:normative decision theory, which analyzes the outcomes of decisions or determines theoptimal decisions given constraints and assumptions, and descriptive decision theory, which analyzeshow agents actually make the decisions they do.
Decision theory, as it has grown up in recent years, is a formalization of the problems involved in making optimal choices. In a certain sense — a very abstract sense, to be sure — it incorporates among others operations research, theoretical economics, and wide areas of statistics, among others.
Kenneth Arrow,The Economics of Information (1984) p. 55
"Interactive Decision Theory" would perhaps be a more descriptive name for the discipline usually calledGame Theory.
The researcher hoping to break new ground in the theory of experimental design should involve himself in the design of actual experiments. The investigator who hopes to revolutionize decision theory should observe and take part in the making of important decisions.
Linear programming is viewed as a revolutionary development giving man the ability to state general objectives and to find, by means of the simplex method, optimal policy decisions for a broad class of practical decision problems of great complexity. In the real world, planning tends to be ad hoc because of the many special-interest groups with their multiple objectives.
George Dantzig (1983) "Reminiscences about the origins of linear programming". In:Mathematical programming : the state of the art. New York, 1983, p. 78-86.
Pascal is called the founder of modernprobability theory. He earns this title not only for the familiar correspondence with Fermat on games of chance, but also for his conception of decision theory, and because he was an instrument in the demolition of probabilism, a doctrine which would have precluded rational probability theory.
Ian HackingThe Emergence Of Probability, Chapter 3, Opinion, p. 23.
Decision theory can be pursued not only for the purposes of building foundations for political economy, or of understanding and explaining phenomena that are in themselves intrinsically interesting, but also for the purpose of offering direct advice tobusiness and governmental decision makers. For reasons not clear to me, this territory was very sparsely settled prior toWorld War II. Such inhabitants as it had were mainlyindustrial engineers, students ofpublic administration, and specialists in business functions, none of whom especially identified themselves with the economic sciences...
