Revisiting Almost Second-Degree Stochastic Dominance

Larry Y. Tzeng (), Rachel Huang and Pai-Ta Shih ()
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Larry Y. Tzeng: Department of Finance, National Taiwan University, Taipei 106, Taiwan; and Risk and Insurance Research Center, National Chengchi University, Taipei 116, Taiwan
Pai-Ta Shih: Department of Finance, National Taiwan University, Taipei 106, Taiwan

Management Science, 2013, vol. 59, issue 5, 1250-1254

Abstract: Leshno and Levy [Leshno M, Levy H (2002) Preferred by “all” and preferred by “most” decision makers: Almost stochastic dominance. Management Sci. 48(8):1074--1085] established almost stochastic dominance to reveal preferences for most rather than all decision makers with an increasing and concave utility function. In this paper, we first provide a counterexample to the main theorem of Leshno and Levy related to almost second-degree stochastic dominance. We then redefine this dominance condition and show that the newly defined almost second-degree stochastic dominance is the necessary and sufficient condition to rank distributions for all decision makers excluding the pathological concave preferences. We further extend our results to almost higher-degree stochastic dominance. This paper was accepted by Peter Wakker, decision analysis.

Keywords: stochastic dominance; almost stochastic dominance; risk aversion (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (70)

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