Editing Decision theory (section)

==History==
{{Unreferenced section|date=April 2025}}
The roots of decision theory lie in [[probability theory]], developed by [[Blaise Pascal]] and [[Pierre de Fermat]] in the 17th century, which was later refined by others like [[Christiaan Huygens]]. These developments provided a framework for understanding risk and uncertainty, which are central to [[decision-making]].

In the 18th century, [[Daniel Bernoulli]] introduced the concept of "expected utility" in the context of gambling, which was later formalized by [[John von Neumann]] and [[Oskar Morgenstern]] in the 1940s. Their work on ''Game Theory and Expected Utility Theory'' helped establish a rational basis for decision-making under uncertainty.

After [[World War II]], decision theory expanded into economics, particularly with the work of economists like [[Milton Friedman]] and others, who applied it to market behavior and consumer choice theory. This era also saw the development of [[Bayesian decision theory]], which incorporates [[Bayesian probability]] into decision-making models.

By the late 20th century, scholars like [[Daniel Kahneman]] and [[Amos Tversky]] challenged the assumptions of rational decision-making. Their work in [[behavioral economics]] highlighted [[cognitive bias]]es and [[heuristics]] that influence real-world decisions, leading to the development of [[prospect theory]], which modified expected utility theory by accounting for psychological factors.