Weighted utility and optimism/pessimism: a decision-theoretic foundation of various stochastic dominance orders

Weighted utility and optimism/pessimism: a decision-theoretic foundation of various stochastic dominance orders

We show that a probability distribution likelihood ratio dominates another distribution if and only if, for every weighted utility function, the former is preferred over the latter. Likewise, a probability distribution hazard rate (or reverse hazard rate) dominates another distribution if and only i...

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Veröffentlicht in:American economic journal. Microeconomics 2024-02, Vol.16 (1), p.210-223
1. Verfasser: Wang, Tao
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container_title American economic journal. Microeconomics
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creator Wang, Tao
description We show that a probability distribution likelihood ratio dominates another distribution if and only if, for every weighted utility function, the former is preferred over the latter. Likewise, a probability distribution hazard rate (or reverse hazard rate) dominates another distribution if and only if, the former is preferred by every optimistic (or pessimistic) decision maker. (JEL D11, D83)
doi_str_mv 10.1257/mic.20220350
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title Weighted utility and optimism/pessimism: a decision-theoretic foundation of various stochastic dominance orders
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