Abstract
During the past twenty years, the term stochastic dominance (SD) has been used by economists to describe a particular set of rules for ranking random variables. These rules apply to pairs of random variables, and indicate when one is to be ranked higher than the other by specifying a condition which the difference between their cumulative distribution functions (CDF) must satisfy. Various SD ranking procedures have been employed in both empirical and theoretical analysis. First degree stochastic dominance, second degree stochastic dominance, and Rothschild and Stiglitz’ definition of increasing risk are prominent examples.
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© 1989 Springer-Verlag New York Inc.
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Meyer, J. (1989). Stochastic Dominance and Transformations of Random Variables. In: Fomby, T.B., Seo, T.K. (eds) Studies in the Economics of Uncertainty. Springer, New York, NY. https://doi.org/10.1007/978-1-4613-8922-4_3
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DOI: https://doi.org/10.1007/978-1-4613-8922-4_3
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