Dominance Concepts in Random Outcomes
As a way to approach decision making under risk or uncertainty, four dominance concepts — utility dominance, stochastic dominance, mean-variance dominance, and probability dominance — are reviewed. The characteristic features, the relative merits and shortcomings of these approaches are discussed. Main results and relationships among them are stated. The nondominated set of Ω (a set of random variables) is defined according to different dominance criteria, and interrelationships among them are discussed.
KeywordsUtility Function Risk Aversion Portfolio Selection Stochastic Dominance Uncertain Outcome
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