Bivariate almost stochastic dominance
Journal
Economic Theory
Journal Volume
57
Journal Issue
2
Pages
377-405
Date Issued
2014
Author(s)
Abstract
Univariate almost stochastic dominance has been widely studied and applied since its introduction by Leshno and Levy (Manag Sci 48:1074¡V1085, 2002). This paper extends this construction to the bivariate case by means of suitable two-attribute utility functions. After having confined correlation aversion and correlation loving to some acceptable levels, bivariate almost stochastic dominance rules are introduced for the preferences exhibiting confined correlation aversion and confined correlation loving. The impact of a change in risk in terms of bivariate almost stochastic dominance on optimal saving is analyzed as an application, as well as the effect of envy and altruism on income distributions. Finally, alternative definitions of bivariate almost stochastic dominance are discussed, as well as testing procedures for such dominance rules in financial problems. ? 2014, Springer-Verlag Berlin Heidelberg.
Subjects
Almost stochastic dominance
Correlation aversion
Correlation loving
Optimal saving
Type
journal article