Decision theory

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Decision theory (or the theory of choice) is a branch of applied probability theory and analytic philosophy concerned with the theory of making decisions based on assigning probabilities to various factors and assigning numerical consequences to the outcome.^[1]

There are three branches of decision theory:

1. Normative decision theory: Concerned with the identification of optimal decisions, where optimality is often determined by considering an ideal decision-maker who is able to calculate with perfect accuracy and is in some sense fully rational.
2. Prescriptive decision theory: Concerned with describing observed behaviors through the use of conceptual models, under the assumption that those making the decisions are behaving under some consistent rules.
3. Descriptive decision theory: Analyzes how individuals actually make the decisions that they do.

Decision theory is a broad field from management sciences and is an interdisciplinary topic, studied by management scientists, medical researchers, mathematicians, data scientists, psychologists, biologists,^[2] social scientists, philosophers^[3] and computer scientists.

Empirical applications of this theory are usually done with the help of statistical and discrete mathematical approaches from computer science.