Almost stochastic dominance under inconsistent utility and loss functions. (15th September 2017)

• Record Type: Journal Article
• Authors: Luo, Chunling; He, Zhou; Tan, Chin Hon
• Is Part Of: Journal of applied probability. Volume 54:Number 3(2017)
• Page Start: 763
• Page End: 772
• Publication Date: 2017-09-15
• Subjects: Stochastic dominance, -- almost stochastic dominance, -- utility, -- loss, -- probability distribution; Primary 60E15, -- Secondary 90B50, -- 91B16; 519.2
• DOI: 10.1017/jpr.2017.33
• Languages: English
• ISSNs: 0021-9002

Abstract

Abstract: Current literature on stochastic dominance assumes utility/loss functions to be the same across random variables. However, decision models with inconsistent utility functions have been proposed in the literature. The use of inconsistent loss functions when comparing between two random variables can also be appropriate under other problem settings. In this paper we generalize almost stochastic dominance to problems with inconsistent utility/loss functions. In particular, we propose a set of conditions that is necessary and sufficient for clear preferences when the utility/loss functions are allowed to vary across different random variables.