Revisiting Independence and Stochastic Dominance for Compound Lotteries

Alexander Zimper

The B.E. Journal of Theoretical Economics, 2008, vol. 8, issue 1, 11

Abstract: We establish mathematical equivalence between independence of irrelevant alternatives and monotonicity with respect to first order stochastic dominance. This formal equivalence result between the two principles is obtained under two key conditions. Firstly, for all natural numbers m, each principle is defined on the domain of compound lotteries with compoundness level m. Secondly, the standard concept of reduction of compound lotteries applies.

Keywords: normative; theory; of; decision; under; risk (search for similar items in EconPapers)
Date: 2008
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DOI: 10.2202/1935-1704.1444

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