Partial Stochastic Dominance

Takashi Kamihigashi and John Stachurski

No 2014-403, Working Papers from Department of Research, Ipag Business School

Abstract: The stochastic dominance ordering over probability distributions is one of the most familiar concepts in economic and financial analysis. One difficulty with stochastic dominance is that many distributions are not ranked at all, even when arbitrarily close to other distributions that are. Because of this, several measures of ”partial” or ”near” stochastic dominance have been introduced into the literature—albeit on a somewhat ad hoc basis. This paper argues that there is a single measure of extent of stochastic dominance that can be regarded as the most natural default measure from the perspective of economic analysis.

Keywords: Stochastic dominance; stochastic order (search for similar items in EconPapers)
JEL-codes: D81 G11 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-01-01
New Economics Papers: this item is included in nep-mic and nep-ore
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Working Paper: Partial Stochastic Dominance (2014)
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