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First and Second Degree Transformations and Comparative Statics under Uncertainty

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  • Ormiston, Michael B

Abstract

The purpose of this paper is to investigate the direction of change in the optimal value of the choice variable following a deterministic transformation of the underlying random variable. Here, the author considers transformations representing either first or second degree stochastically dominant shifts. Several theorems are presented giving conditions on the economic model and risk-taking characteristics of the decisionmaker that are sufficient to obtain unambiguous comparative statics results for arbitrary first degree stochastically dominant and second degree stochastically dominant transformations as well as for simple first degree stochastically dominant and second degree stochastically dominant transformations. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Ormiston, Michael B, 1992. "First and Second Degree Transformations and Comparative Statics under Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 33-44, February.
    • Handle: RePEc:ier:iecrev:v:33:y:1992:i:1:p:33-44
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    Cited by:

    1. Hennessy, David A. & Babcock, Bruce A., 1998. "Information, flexibility, and value added1," Information Economics and Policy, Elsevier, vol. 10(4), pages 431-449, December.
    2. Bucher, Monika & Hauck, Achim & Neyer, Ulrike, 2014. "Frictions in the interbank market and uncertain liquidity needs: Implications for monetary policy implementation," DICE Discussion Papers 134, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. Horowitz, I. & Thompson, P., 1995. "The sophisticated decision maker: All work and no pay?," Omega, Elsevier, vol. 23(1), pages 1-11, February.
    4. Wagener, Andreas & Zenker, Juliane, 2018. "Decoupled but not neutral: The effects of stochastic transfers on investment and incomes in rural Thailand," TVSEP Working Papers wp-008, Leibniz Universitaet Hannover, Institute of Development and Agricultural Economics, Project TVSEP.
    5. Wagener, Andreas & Zenker, Juliane, 2015. "Stochastic Transfers, Risky Investment and Incomes: Evidence from an Income Guarantee Program in Thailand," Hannover Economic Papers (HEP) dp-562, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    6. Hennessy, David A., 1997. "Equilibrium in production and futures markets," Journal of Economics and Business, Elsevier, vol. 49(5), pages 399-418.
    7. Hennessy, David A., 1998. "Risk Market Innovations and Choice," International Review of Economics & Finance, Elsevier, vol. 7(3), pages 331-341.
    8. Alexander E. Saak & David A. Hennessy, 2002. "Planting Decisions and Uncertain Consumer Acceptance of Genetically Modified Crop Varieties," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 308-319.
    9. Andreas Wagener & Juliane Zenker, 2021. "Decoupled but Not Neutral: The Effects of Counter‐Cyclical Cash Transfers on Investment and Incomes in Rural Thailand†," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1637-1660, October.
    10. Bao Jiayi & Ho Benjamin, 2015. "Heterogeneous Effects of Informational Nudges on Pro-social Behavior," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(4), pages 1619-1655, October.
    11. Snow, Arthur, 2003. "Substitution and income effects for increases in risk," Economics Letters, Elsevier, vol. 79(3), pages 313-317, June.
    12. Hennessy, David A., 1997. "Stochastic technologies and the adoption decision," Journal of Development Economics, Elsevier, vol. 54(2), pages 437-453, December.
    13. Machnes, Yaffa, 1995. "Deductible insurance and production," Insurance: Mathematics and Economics, Elsevier, vol. 17(2), pages 119-123, October.
    14. Mitusch, Kay & Nautz, Dieter, 2001. "Interest rate and liquidity risk management and the European money supply process," Journal of Banking & Finance, Elsevier, vol. 25(11), pages 2089-2101, November.
    15. Susan Athey, 2002. "Monotone Comparative Statics under Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 187-223.
    16. Hennessy, David A., 1999. "Capacity choice in a two-stage problem under uncertainty," Economics Letters, Elsevier, vol. 65(2), pages 177-182, November.
    17. Nautz, Dieter, 1998. "Banks' demand for reserves when future monetary policy is uncertain," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 161-183, June.
    18. Gollier, Christian & Schlesinger, Harris, 1996. "Portfolio choice under noisy asset returns," Economics Letters, Elsevier, vol. 53(1), pages 47-51, October.

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