First-order dominance: stronger characterization and a bivariate checking algorithm

Troels Martin Range*, Lars Peter Raahave Østerdal

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

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Abstract

How to determine whether one distribution first-order dominates another is a fundamental problem that has many applications in economics, finance, probability theory, and statistics. Nevertheless, little is known about how to efficiently check first-order dominance for finite multivariate distributions. Utilizing that this problem can be formulated as a transportation problem with a special structure, we provide a stronger characterization of multivariate first-order dominance and develop a linear time complexity checking algorithm for the bivariate case. We illustrate the use of the checking algorithm when numerically assessing first-order dominance among continuous bivariate distributions.

Original languageEnglish
JournalMathematical Programming
Volume173
Issue number1-2
Pages (from-to)193-219
ISSN0025-5610
DOIs
Publication statusPublished - Jan 2019

Keywords

  • Characterization
  • Checking algorithm
  • Multivariate first-order dominance
  • Network problem
  • Usual stochastic order

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