Spaces for agreement: a theory of Time-Stochastic Dominance
Many investments involve both a long time-horizon and risky returns. Making investment decisions thus requires assumptions about time and risk preferences. In the public sector in particular, such assumptions are frequently contested and there is no immediate prospect of universal agreement. Motivated by these observations, we develop a theory and method of finding �spaces for agreement�. These are combinations of classes of discount and utility function, for which one investment dominates another (or �almost� does so), so that all decision-makers whose preferences can be represented by such combinations would agree on the option to be chosen. The theory is built on combining the insights of stochastic dominance on the one hand, and time dominance on the other, thus offering a non-parametric approach to inter-temporal, risky choice.
|Date of creation:||Oct 2013|
|Contact details of provider:|| Postal: Houghton Street, London WC2A 2AE|
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/grantham.
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Haim Levy & Jacob Paroush, 1974. "Multi-Period Stochastic Dominance," Management Science, INFORMS, vol. 21(4), pages 428-435, December.
- Simon Dietz & Nicholas Stern, 2008. "Why Economic Analysis Supports Strong Action on Climate Change: A Response to the Stern Review's Critics," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(1), pages 94-113, Winter.
- Levy, Moshe, 2009. "Almost Stochastic Dominance and stocks for the long run," European Journal of Operational Research, Elsevier, vol. 194(1), pages 250-257, April.
- Ekern, Steinar, 1981.
"Time Dominance Efficiency Analysis,"
Journal of Finance,
American Finance Association, vol. 36(5), pages 1023-1034, December.
- Steinar Ekern., 1980. "Time Dominance Efficiency Analysis," Research Program in Finance Working Papers 105, University of California at Berkeley.
- Bohren, Oyvind & Hansen, Terje, 1980. " Capital Budgeting with Unspecified Discount Rates," Scandinavian Journal of Economics, Wiley Blackwell, vol. 82(1), pages 45-58.
- Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
- Levy, Haim & Hanoch, Giora, 1970. "Relative Effectiveness of Efficiency Criteria for Portfolio Selection," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 5(01), pages 63-76, March.
- Wilfred Beckerman & Cameron Hepburn, 2007. "Ethics of the Discount Rate in the Stern Review on the Economics of Climate Change," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 8(1), pages 187-210, January.
- A. B. Atkinson & F. Bourguignon, 1982. "The Comparison of Multi-Dimensioned Distributions of Economic Status," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 183-201.
- Partha Dasgupta, 2007. "Commentary: The Stern Review's Economics of Climate Change," National Institute Economic Review, National Institute of Economic and Social Research, vol. 199(1), pages 4-7, January.
- Moshe Leshno & Haim Levy, 2002. "Preferred by "All" and Preferred by "Most" Decision Makers: Almost Stochastic Dominance," Management Science, INFORMS, vol. 48(8), pages 1074-1085, August.
- William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
- David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
- Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
- Maurice Salles, 2005. "Social Choice," Post-Print halshs-00337075, HAL.
- Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
- Christian Gollier & Richard Zeckhauser, 2005. "Aggregation of Heterogeneous Time Preferences," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 878-896, August.
- Simon Dietz & Anca N. Matei, 2013. "Is there space for agreement on climate change? A non-parametric approach to policy evaluation," GRI Working Papers 136, Grantham Research Institute on Climate Change and the Environment. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:lsg:lsgwps:wp137. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The GRI Administration)
If references are entirely missing, you can add them using this form.