Stochastic-dominance on unidimensional grids

Stochastic-dominance on unidimensional grids

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Article ID: iaor20041774
Country: United States
Volume: 20
Issue: 3
Start Page Number: 513
End Page Number: 525
Publication Date: Aug 1995
Journal: Mathematics of Operations Research
Authors: ,
Abstract:

Special stochastic-dominance relations for probability distributions on a finite grid of evenly-spaced points are considered. The relations depend solely on iterated partial sums of grid-point probabilities and are very computer efficient. Their corresponding classes of utility functions for expected-utility comparisons consist of functions defined on the grid that mimic in the large the traditional continuous functions whose derivatives alternate in sign. The first-degree and second-degree relations are identical to their traditional counterparts defined from iterated integrals of cumulative distribution functions. The higher-degree relations differ from the traditional relations in interesting and sometimes subtle ways. The paper explores aspects of the partial-sums relations, including effects of grid refinements and extensions, and describes their relationships to the traditional relations.

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