Economic Decisions in Engineering
Classical decision theory, deterministic decision rules, decision trees, influence diagrams, single/multiple stage analysis, sensitivity analysis; subjective probability, heuristics and biases, Bayesian methods, conjugate belief forms, inference, belief assessment methods, value of information, risk analysis; utility theory, risk aversion, conflicting objectives, multi-attribute decision theory, analytic hierarchy process.
IE54600
Credit Hours:
3Learning Objective:
Course Objective We will learn decision making and rationality, including decision analysis; decision making under uncertainty; various descriptive and prescriptive models from operations research, economics, and business. Applications are drawn from engineering decision-making, public policy, and personal decision-making. Attention is also paid to designing aids to improve decision-making. Use of risk analysis software is optional (not required).Description:
Classical decision theory, deterministic decision rules, decision trees, influence diagrams, single/multiple stage analysis, sensitivity analysis; subjective probability, heuristics and biases, Bayesian methods, conjugate belief forms, inference, belief assessment methods, value of information, risk analysis; utility theory, risk aversion, conflicting objectives, multi-attribute decision theory, analytic hierarchy process.
Topics Covered:
Classical decision theory, deterministic decision rules, decision trees, influence diagrams, single/multiple stage analysis, sensitivity analysis; subjective probability, heuristics and biases, Bayesian methods, conjugate belief forms, inference, belief assessment methods, value of information, legal reasoning, risk analysis; utility theory, risk aversion, conflicting objectives, multi-attribute decision theory, analytic hierarchy process.Prerequisites:
Background in probability theory and familiar with general economics concepts.Applied / Theory:
50 / 50Web Address:
https://mycourses.purdue.edu/Web Content:
Syllabus, grades, lecture notes, homework assignments, solutions.Homework:
Seven to eight homeworks.Projects:
None.Exams:
Two midterms and one final examTextbooks:
Official textbook information is now listed in the Schedule of Classes. NOTE: Textbook information is subject to be changed at any time at the discretion of the faculty member. If you have questions or concerns please contact the academic department.Tentative: Required: Clemen and Reilly, Making Hard Decisions with Decision Tools Suite. No specific edition required and the software that comes with the book will not be used.