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Extension of stochastic dominance theory to random variables

Published online by Cambridge University Press:  15 August 2002

Chi-Kwong Li  and
Wing-Keung Wong
Chi-Kwong Li
Affiliation:
Department of Mathematics, College of William and Mary, Williamsburg, VA 23187, U.S.A.
Wing-Keung Wong
Affiliation:
Department of Economics, National University of Singapore, and Department of Statistics and Graduate School of Business, University of Wisconsin-Madison, U.S.A.
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Abstract

In this paper, we develop some stochastic dominancetheorems for the location and scale family and linear combinations ofrandom variables and for risk lovers as well as risk averters thatextend results in Hadar and Russell (1971) and Tesfatsion (1976). Theresults are discussed and applied to decision-making.

Keywords

Ascending stochastic dominancedescending stochasticdominancerisk loversrisk avertersutility function.
Type
Research Article
Information
RAIRO - Operations Research , Volume 33 , Issue 4 , October 1999 , pp. 509 - 524
Copyright
© EDP Sciences, 1999

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