Abstract
We investigate the third-degree stochastic dominance order, which is receiving increasing attention in the field of inequality measurement. Observing that this partial order fails to satisfy the von Neumann--Morgenstern independence property in the space of random variables, we introduce the concepts of strong and local third-degree stochastic dominance, which do not suffer from this deficiency. We motivate these two new binary relations and characterize them in the spirit of the Lorenz characterization of the second-degree stochastic order, comparing our findings with the closest results in inequality literature.
Original language | English |
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Pages (from-to) | 249-268 |
Number of pages | 20 |
Journal | Journal of Economic Inequality |
Volume | 7 |
Issue number | 3 |
DOIs | |
Publication status | Published - 2009 |
Externally published | Yes |
Keywords
- Inequality measurement
- Lorenz order
- Stochastic dominance