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Bivariate almost stochastic dominance

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  • Michel Denuit
  • Rachel Huang
  • Larry Tzeng

Abstract

Univariate almost stochastic dominance has been widely studied and applied since its introduction by Leshno and Levy (Manag Sci 48:1074–1085, 2002 ). This paper extends this construction to the bivariate case by means of suitable two-attribute utility functions. After having confined correlation aversion and correlation loving to some acceptable levels, bivariate almost stochastic dominance rules are introduced for the preferences exhibiting confined correlation aversion and confined correlation loving. The impact of a change in risk in terms of bivariate almost stochastic dominance on optimal saving is analyzed as an application, as well as the effect of envy and altruism on income distributions. Finally, alternative definitions of bivariate almost stochastic dominance are discussed, as well as testing procedures for such dominance rules in financial problems. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Michel Denuit & Rachel Huang & Larry Tzeng, 2014. "Bivariate almost stochastic dominance," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 57(2), pages 377-405, October.
    • Handle: RePEc:spr:joecth:v:57:y:2014:i:2:p:377-405
    DOI: 10.1007/s00199-014-0826-y
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    3. Michel Denuit & Rachel Huang & Larry Tzeng, 2015. "Almost expectation and excess dependence notions," Theory and Decision, Springer, vol. 79(3), pages 375-401, November.
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    5. Tsung-Chih Lai & Jiun-Hua Su, 2023. "Counterfactual Copula and Its Application to the Effects of College Education on Intergenerational Mobility," Papers 2303.06658, arXiv.org.
    6. Diego C. Nocetti, 2016. "Robust Comparative Statics of Risk Changes," Management Science, INFORMS, vol. 62(5), pages 1381-1392, May.

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    More about this item

    Keywords

    Almost stochastic dominance; Correlation aversion; Correlation loving; Optimal saving; D81;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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