Question

explain utility theory and apply it to decision under risk

Answer 1

theory is based on this assumption of rationality and describes all decisionoutcomes (financial and otherwise) in terms of the utility (or value) placed on them by individuals. Within this framework, decisions can be understood in terms of rationally ordered levels of utility attached to different outcomes.

As any gambler knows, risks come with benefits. But there is an additional benefit of risks: when something terrible happens as a result of human planning, we can learn something about how to do better the next time. In this course sequence we explore what we know about how people make decisions about technologies and new media and apply our understanding of risk to the design of safe, secure technologies. We consider cases such as eBay and the Deepwater Horizon oil platform disaster, as well as examples of resilient engineering, to discover what can go wrong and how to make technology more beneficial and safe.

The course sequence considers diverse approaches to safety, security and risk. It focuses in-depth on decision theory, risk and trust in social media, and the analysis and control of societal risk. In addition to becoming more rational decision makers, students can expect to learn how to anticipate risks as engineers, and to understand its scientific, social, and normative implications in an information society.