Necessary conditions for comparative statics under uncertainty

Michael B. Ormiston, Edward Schlee

Research output: Contribution to journalArticle

13 Scopus citations

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 languageEnglish (US)
Pages (from-to)429-434
Number of pages6
JournalEconomics Letters
Volume40
Issue number4
DOIs
StatePublished - Dec 1992

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ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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