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Ilia Tsetlin
Professor of Decision Sciences
Keywords
(1 + γ) Stochastic Dominance; Transfers; Indirect Utility
Journal Article
The authors develop a continuum of stochastic dominance rules, covering preferences from first- to second-order stochastic dominance. The motivation for such a continuum is that while decision makers have a preference for “more is better,” they are mostly risk averse but cannot assert that they would dislike any risk. For example, situations with targets, aspiration levels, and local convexities in induced utility functions in sequential decision problems may lead to preferences for some risks.