Centre for Development Economics
Department of Economics, Delhi School of Economics


Comparative riskiness of random vector outcomes


Sudhir Shah

Delhi School of Economics, University of Delhi

Thursday, 5th February 2015 at 3:00 PM

Venue : Seminar Room (First Floor)
Department of Economics, Delhi School of Economics

All are cordially invited

One lottery over a vector outcome space is said to be riskier than another if every risk averse decision-maker weakly prefers the latter to the former. For very general vector outcome settings, we characterize this condition in terms of second order stochastic dominance applied to the families of utility distributions generated by the given lotteries and the admissible family of utility functions. The riskiness of random processes can be compared in this framework by identifying the riskiness of a process with the riskiness of the distribution generated by it on the vector space containing its sample paths. We illustrate the characterization’s usefulness by applying it to the analysis of auctions, utility regulation, inventory control, portfolio choice, public goods and moral hazard in teams.

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