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Stochastic Dominance: An Approach to Decision Making Under Risk
Author(s) -
Buckley James J.
Publication year - 1986
Publication title -
risk analysis
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.972
H-Index - 130
eISSN - 1539-6924
pISSN - 0272-4332
DOI - 10.1111/j.1539-6924.1986.tb00192.x
Subject(s) - stochastic dominance , decision maker , dominance (genetics) , risk analysis (engineering) , set (abstract data type) , operations research , decision analysis , expected utility hypothesis , computer science , action (physics) , function (biology) , engineering , mathematical optimization , business , economics , mathematics , mathematical economics , evolutionary biology , biology , gene , programming language , physics , quantum mechanics , biochemistry , chemistry
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.