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Revisiting Almost Second-Degree Stochastic Dominance

Author

Listed:
  • Larry Y. Tzeng

    (Department of Finance, National Taiwan University, Taipei 106, Taiwan; and Risk and Insurance Research Center, National Chengchi University, Taipei 116, Taiwan)

  • Rachel J. Huang

    (Graduate Institute of Finance, National Taiwan University of Science and Technology, Taipei 106, Taiwan; and Risk and Insurance Research Center, National Chengchi University, Taipei 116, Taiwan)

  • Pai-Ta Shih

    (Department of Finance, National Taiwan University, Taipei 106, Taiwan)

Abstract

Leshno and Levy [Leshno M, Levy H (2002) Preferred by “all” and preferred by “most” decision makers: Almost stochastic dominance. Management Sci. 48(8):1074--1085] established almost stochastic dominance to reveal preferences for most rather than all decision makers with an increasing and concave utility function. In this paper, we first provide a counterexample to the main theorem of Leshno and Levy related to almost second-degree stochastic dominance. We then redefine this dominance condition and show that the newly defined almost second-degree stochastic dominance is the necessary and sufficient condition to rank distributions for all decision makers excluding the pathological concave preferences. We further extend our results to almost higher-degree stochastic dominance. This paper was accepted by Peter Wakker, decision analysis.

Suggested Citation

  • Larry Y. Tzeng & Rachel J. Huang & Pai-Ta Shih, 2013. "Revisiting Almost Second-Degree Stochastic Dominance," Management Science, INFORMS, vol. 59(5), pages 1250-1254, May.
    • Handle: RePEc:inm:ormnsc:v:59:y:2013:i:5:p:1250-1254
    DOI: 10.1287/mnsc.1120.1616
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    References listed on IDEAS

    as
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