Almost stochastic dominance under inconsistent utility and loss functions

Chunling Luo, Department of Industrial & Systems Engineering, National University of Singapore, Singapore
Zhou He, Department of Industrial & Systems Engineering, National University of Singapore, Singapore
Chin Hon Tan, Department of Industrial & Systems Engineering, National University of Singapore, Singapore
ABSTRACT

Current literature on stochastic dominance assumes utility/loss functions to be the same across random variables. However, decision models with inconsistent utility functions have been proposed in the literature. The use of inconsistent loss functions when comparing between two random variables can also be appropriate under other problem settings. In this paper we generalize almost stochastic dominance to problems with inconsistent utility/loss functions. In particular, we propose a set of conditions that is necessary and sufficient for clear preferences when the utility/loss functions are allowed to vary across different random variables.