How to determine whether one distribution first-order dominates another is a fundamental problem that has many applications in economics, finance, probability theory, and statistics. Nevertheless, little is known about how to efficiently check first-order dominance for finite multivariate distributions. Utilizing that this problem can be formulated as a transportation problem with a special structure, we provide a stronger characterization of multivariate first-order dominance and develop a linear time complexity checking algorithm for the bivariate case. We illustrate the use of the checking algorithm when numerically assessing first-order dominance among continuous bivariate distributions.
Bibliografisk notePublished online: 2. December 2017
- Multivariate first-order dominance
- Usual stochastic order
- Network problem
- Checking algorithm
Martin Range, T., & Østerdal, L. P. (2019). First-order Dominance: Stronger Characterization and a Bivariate Checking Algorithm. Mathematical Programming, 173(1/2), 193-219. https://doi.org/10.1007/s10107-017-1213-9