A Note on Almost Stochastic Dominance

Xu Guo, Xuehu Zhu, Wing-Keung Wong and Lixing Zhu

MPRA Paper from University Library of Munich, Germany

Abstract: To satisfy the property of expected-utility maximization, Tzeng et al. (2012) modify the almost second-degree stochastic dominance proposed by Leshno and Levy (2002) and define almost higher-degree stochastic dominance. In this note, we further investigate the relevant properties. We define an almost third-degree stochastic dominance in the same way that Leshno and Levy (2002) define second-degree stochastic dominance and show that Leshno and Levy's (2002) almost stochastic dominance has the hierarchy property but not expected-utility maximization. In contrast, Tzeng et al.'s (2012) definition has the property of expected-utility maximization but not the hierarchy property. This phenomenon also holds for higher-degree stochastic dominance for these two concepts. Thus, the findings in this paper suggest that Leshno and Levy's (2002) definitions of ASSD and ATSD might be better than those defined by Tzeng et al. (2012) if the hierarchy property is considered to be an important issue.

Keywords: Almost stochastic dominance; expected-utility maximization; hierarchy of stochastic dominance (search for similar items in EconPapers)
JEL-codes: C02 C10 G11 (search for similar items in EconPapers)
Date: 2013-02-10
New Economics Papers: this item is included in nep-mic, nep-ore and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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