What is the most common decision making math model?

Question

I have been told that there are psychological math model to make decision. I want to know what is it and how it work.

Answer 1

You may want to look at Markov decision process: http://en.wikipedia.org/wiki/Markov_decision_process

Answer 2

What you are referring is probably 'prospect theory' which is developed by two psychologist Kahneman and Tversky. As one can expect from their background they developed a more descriptive theory of decision making than for example expected utility theory.. I can suggest the book "Prospect Theory: For Risk and Ambiguity" by Peter Wakker.

However, the most common model differs from this and it is certainly expected utility theory ( and its generalizations).