Stochastic Dominance Under Bayesian Learning

Posted: 19 Jun 2005

See all articles by Sushil Bikhchandani

Sushil Bikhchandani

University of California, Los Angeles - Anderson School of Management

Uzi Segal

Boston College - Department of Economics

Sunil Sharma

George Washington University - Elliott School of International Affairs

Abstract

The concept of first-order stochastic dominance defined on distributions is inadequate in models with learning. We extend this concept to the space of distributions on distributions. We discuss conditions under which for all common observations one person's beliefs (over a set of probability distributions) dominate another person's beliefs by first-order stochastic dominance. We obtain sufficient conditions for this partial order and show that the sufficient conditions are necessary, provided that the underlying distributions satisfy an additional assumption. These conditions can be verified without taking any observations. Applications are discussed.

Suggested Citation

Bikhchandani, Sushil and Segal, Uzi and Sharma, Sunil, Stochastic Dominance Under Bayesian Learning. Available at SSRN: https://ssrn.com/abstract=744107

Sushil Bikhchandani

University of California, Los Angeles - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095
United States
310-206-2686 (Phone)
310-825-1581 (Fax)

Uzi Segal

Boston College - Department of Economics ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Sunil Sharma (Contact Author)

George Washington University - Elliott School of International Affairs ( email )

Institute for International Economic Policy
1957 E Street NW
Washington, DC 20052
United States

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