TY - JOUR

T1 - The Mass Transfer Approach to Multivariate Discrete First Order Stochastic Dominance

T2 - Direct Proof and Implications

AU - Østerdal, Lars Peter

PY - 2010/11

Y1 - 2010/11

N2 - A fundamental result in the theory of stochastic dominance tells that first order dominance between two finite multivariate distributions is equivalent to the property that the one can be obtained from the other by shifting probability mass from one outcome to another that is worse a finite number of times. This paper provides a new and elementary proof of that result by showing that starting with an arbitrary system of mass transfers, whenever the resulting distribution is first order dominated one can gradually rearrange transfers, according to a certain decentralized procedure, and obtain a system of transfers all shifting mass to outcomes that are worse.

AB - A fundamental result in the theory of stochastic dominance tells that first order dominance between two finite multivariate distributions is equivalent to the property that the one can be obtained from the other by shifting probability mass from one outcome to another that is worse a finite number of times. This paper provides a new and elementary proof of that result by showing that starting with an arbitrary system of mass transfers, whenever the resulting distribution is first order dominated one can gradually rearrange transfers, according to a certain decentralized procedure, and obtain a system of transfers all shifting mass to outcomes that are worse.

KW - Multidimensional first degree distributional dominance

KW - The usual stochastic order

KW - Multivariate majorization

KW - Generalized equivalence result

KW - Multidimensional first degree distributional dominance

KW - The usual stochastic order

KW - Multivariate majorization

KW - Generalized equivalence result

U2 - 10.1016/j.jmateco.2010.08.018

DO - 10.1016/j.jmateco.2010.08.018

M3 - Journal article

VL - 46

SP - 1222

EP - 1228

JO - Journal of Mathematical Economics

JF - Journal of Mathematical Economics

SN - 0304-4068

IS - 6

ER -