Abstract
We investigate the comparative static properties of three classes of CDF changes: first and second degree stochastic dominant shifts, and mean preserving contractions. For each class, we provide conditions that are necessary and sufficient for a dominating shift to cause an unambiguous change in the choice variable. This allows us to see the trade-offs one must make between restrictions on preferences and CDF changes to obtain interesting comparative statics results. We then investigate the implications of our results for the two-period consumption-savings models and for distinguishing agents that do and do not obey the expected utility hypothesis.
Original language | English (US) |
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Pages (from-to) | 429-434 |
Number of pages | 6 |
Journal | Economics Letters |
Volume | 40 |
Issue number | 4 |
DOIs | |
State | Published - Dec 1992 |
ASJC Scopus subject areas
- Finance
- Economics and Econometrics