Comparing Risks by Acceptance and Rejection

S-Tier
Journal: Journal of Political Economy
Year: 2011
Volume: 119
Issue: 4
Pages: 617 - 638

Score contribution per author:

8.043 = (α=2.01 / 1 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Stochastic dominance is a partial order on risky assets ("gambles") that is based on the uniform preference--of all decision-makers in an appropriate class--for one gamble over another. We modify this requirement, first, by taking into account the status quo (given by the current wealth) and the possibility of rejecting gambles, and second, by comparing rejections that are substantive (i.e., uniform over wealth levels or over utilities). This yields two new stochastic orders: "wealth-uniform dominance" and "utility-uniform dominance." Unlike stochastic dominance, these two orders are complete: any two gambles can be compared. Moreover, they are equivalent to the orders induced by, respectively, the Aumann-Serrano index of riskiness and the Foster-Hart measure of riskiness.

Technical Details

RePEc Handle
repec:ucp:jpolec:doi:10.1086/662222
Journal Field
General
Author Count
1
Added to Database
2026-01-25