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A recent contribution by Meyer et al. (2009, p. 521) corrected an error of factby Hardaker et al. (2004b, p. 253) about the comparison between stochasticdominance with respect to a function (SDRF) and stochastic efficiency withrespect to a function (SERF). While both methods compare risky prospects fora bounded range of degrees of risk aversion, SERF, unlike SDRF, also demandsan assumption that a chosen measure of risk aversion is constant over all levelsof outcomes being evaluated. It is argued that it is generally reasonable to makesuch an assumption, especially when the form of the utility function and thebounds on the degree of risk aversion are carefully chosen. Then SERF has theadvantage that it can lead to a smaller efficient set than that identified bySDRF. SERF also has advantages of ease and transparency in use.

Keywords: risk aversion ; stochastic dominance ; stochastic efficiency

Subject(s): Research Methods/ Statistical Methods

Issue Date: 2010

Publication Type: Journal Article

PURL Identifier: http://purl.umn.edu/162014 Published in: Australian Journal of Agricultural and Resource Economics, Volume 54, Issue 3 Page range: 379-383

Total Pages: 5

Record appears in: Australian Agricultural and Resource Economics Society (AARES) > Australian Journal of Agricultural and Resource Economics





Autor: Hardaker, J.B. ; Lien, Gudbrand D.

Fuente: http://ageconsearch.umn.edu/record/162014?ln=en







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