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Stochastic Dominance: An Approach to Decision Making Under Risk

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  • James J. Buckley

Abstract

This paper introduces stochastic dominance as a technique to reduce the set of possible actions that a decision maker must consider in a decision problem under risk. The procedure usually does not choose an optimal action, but instead eliminates certain actions as unacceptable. Very little need be known about the decision maker's utility function. Two possible applications are presented: (1) upgrading buildings to better withstand an earthquake; and (2) choosing a site for a LNG facility.

Suggested Citation

  • James J. Buckley, 1986. "Stochastic Dominance: An Approach to Decision Making Under Risk," Risk Analysis, John Wiley & Sons, vol. 6(1), pages 35-41, March.
  • Handle: RePEc:wly:riskan:v:6:y:1986:i:1:p:35-41
    DOI: 10.1111/j.1539-6924.1986.tb00192.x
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    References listed on IDEAS

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    1. James P. Quirk & Rubin Saposnik, 1962. "Admissibility and Measurable Utility Functions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 29(2), pages 140-146.
    2. Vijay S. Bawa, 1982. "Research Bibliography---Stochastic Dominance: A Research Bibliography," Management Science, INFORMS, vol. 28(6), pages 698-712, June.
    3. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
    4. Rakesh Kumar Sarin, 1983. "A Social Decision Analysis of the Earthquake Safety Problem: The Case of Existing Los Angeles Buildings," Risk Analysis, John Wiley & Sons, vol. 3(1), pages 35-50, March.
    5. Howard Kunreuther & John W. Lathrop, 1981. "Siting Hazardous Facilities: Lessons from LNG," Risk Analysis, John Wiley & Sons, vol. 1(4), pages 289-302, December.
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    Cited by:

    1. Misganaw Teshager Abeje & Atsushi Tsunekawa & Enyew Adgo & Nigussie Haregeweyn & Zerihun Nigussie & Zemen Ayalew & Asres Elias & Dessalegn Molla & Daregot Berihun, 2019. "Exploring Drivers of Livelihood Diversification and Its Effect on Adoption of Sustainable Land Management Practices in the Upper Blue Nile Basin, Ethiopia," Sustainability, MDPI, vol. 11(10), pages 1-23, May.
    2. Louis Anthony (Tony) Cox, 2012. "Confronting Deep Uncertainties in Risk Analysis," Risk Analysis, John Wiley & Sons, vol. 32(10), pages 1607-1629, October.

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