First-order Dominance: Stronger Characterization and a Bivariate Checking Algorithm

Troels Martin Range, Lars Peter Østerdal

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

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.
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.
LanguageEnglish
JournalMathematical Programming
Volume173
Issue number1/2
Pages193-219
Number of pages27
ISSN0025-5610
DOIs
StatePublished - Jan 2019

Bibliographical note

Published online: 2. December 2017

Keywords

  • Multivariate first-order dominance
  • Usual stochastic order
  • Characterization
  • Network problem
  • Checking algorithm

Cite this

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First-order Dominance : Stronger Characterization and a Bivariate Checking Algorithm. / Martin Range, Troels; Østerdal, Lars Peter.

In: Mathematical Programming, Vol. 173, No. 1/2, 01.2019, p. 193-219.

Research output: Contribution to journalJournal articleResearchpeer-review

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