Bivariate almost stochastic dominance

Michel Denuit (), Rachel Huang () and Larry Tzeng ()

Economic Theory, 2014, vol. 57, issue 2, 377-405

Abstract: Univariate almost stochastic dominance has been widely studied and applied since its introduction by Leshno and Levy (Manag Sci 48:1074–1085, 2002 ). This paper extends this construction to the bivariate case by means of suitable two-attribute utility functions. After having confined correlation aversion and correlation loving to some acceptable levels, bivariate almost stochastic dominance rules are introduced for the preferences exhibiting confined correlation aversion and confined correlation loving. The impact of a change in risk in terms of bivariate almost stochastic dominance on optimal saving is analyzed as an application, as well as the effect of envy and altruism on income distributions. Finally, alternative definitions of bivariate almost stochastic dominance are discussed, as well as testing procedures for such dominance rules in financial problems. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Almost stochastic dominance; Correlation aversion; Correlation loving; Optimal saving; D81 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (5)

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Working Paper: Bivariate almost stochastic dominance (2014)
Working Paper: Bivariate Almost Stochastic Dominance (2013)
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DOI: 10.1007/s00199-014-0826-y

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