Comparative Statics under Uncertainty with the Monotone Probability Ratio Order Revisited

Suyeol Ryu, Iltae Kim and Soo-Jong Kim
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Suyeol Ryu: Andong National University
Iltae Kim: Chonnam National University
Soo-Jong Kim: The Board of Audit and Inspection of Korea

Korean Economic Review, 2010, vol. 26, 203-222

Abstract: This paper proposes a ��left-side monotone likelihood ratio�� (L-MLR) order which is a more restrictive concept than the ��monotone probability ratio�� (MPR) order and generalizes the comparative static result for the MPR change to the non-linear case in the standard one-argument decision model. The L-MLR defines an order on random distribution that lies between ��monotone likelihood ratio�� (MLR) and MPR. Transitivity, however, does not hold for L-MLR and we show that an important relationship exists between the orders, L-MLR and MPR. This paper also shows that an MPR change can always be decomposed into a sequence of L-MLR shifts.

Keywords: Left-side monotone likelihood ratio (L-MLR); Monotone probability ratio (MPR); Monotone likelihood ratio (MLR); Non-linear payoff function (search for similar items in EconPapers)
JEL-codes: D81 G11 (search for similar items in EconPapers)
Date: 2010
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