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The University of Southampton

ECON3039 Choice and Decision

Module Overview

This module familiarises students with central concepts and findings in decision theory. It will explore in detail how decisions should be made, introducing normative benchmarks such as rationality and consistency, and will present how decisions are made, using both empirical and experimental findings and theoretical arguments. The module will illustrate the concepts by examining decision-making in a variety of economic contexts and environments, and discuss possibly implications for economic policies in these contexts. These contexts include decisions under risk and uncertainty and over time.

Aims and Objectives

Learning Outcomes

Knowledge and Understanding

Having successfully completed this module, you will be able to demonstrate knowledge and understanding of:

  • Analytical methods in decision theory, both theory and model based.
  • The relationship between economic policy recommendations and the assumptions on individuals' cognitive abilities and preferences that underlie such recommendations;
  • Various behavioural and cognitive phenomena that affect economic choices and decision-making.
Subject Specific Intellectual and Research Skills

Having successfully completed this module you will be able to:

  • Abstract some essential features of economic decision-making and provide models useable for the evaluation of policy and other changes in the decision environment.
  • Apply logical analysis to decision-theoretic models and make use of inductive reasoning to generate predictions for individual choice.


This module will begin by reviewing the concept of rational choice from first principles, deriving a normative theory of how to make decisions. It will then focus on a number of specific aspects of decisions, such as decisions under risk and uncertainty, and over time. The normative prescriptions of these models will be contrasted with empirical and experimental insights (e.g., equity premium puzzle, Allais Paradox, Ellsberg Paradox). The module will also consider some extensions that allow for seemingly non-rational behaviour, e.g., temptations or limits on attention. Throughout the module, emphasis will also be put on understanding the implications of behaviour of economic agents in relevant economic settings, such as buying insurance or saving for retirement, as well as the design of economic policies.

Learning and Teaching

Teaching and learning methods

Lectures, masterclasses, experiments.

Independent Study122
Problem Classes8
Total study time150

Resources & Reading list

C. Gollier. The Economics of Risk and Time. 

M. Peterson. Introduction to Decision Theory. 

S. Tadelis. Game Theory (Chapters 1&2). 

I. Gilboa. Theory of Decision under Uncertainty. 


Assessment Strategy

Take-home problem sets during the semester and a final written exam at the end of the semester.


MethodPercentage contribution
Coursework assignment(s) 10%
Coursework assignment(s) 10%
Final Exam  (2 hours) 80%


MethodPercentage contribution
Final Exam  (2 hours) 100%


MethodPercentage contribution
Final Exam  (2 hours) 100%

Repeat Information

Repeat type: Internal & External

Linked modules


To study this module, you will need to have studied the following module(s):

ECON2033Microeconomics of Strategy
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