Abstract

If the survival function of a random variable X lies to the right of the survival function of a random variable Y, then X is said to stochastically dominate Y. Inferring stochastic dominance is particularly complicated because comparing survival functions raises four possible hypotheses: identical survival functions, dominance of X over Y, dominance of Y over X, or crossing survival functions. In this paper, we suggest four-decision tests for stochastic dominance suitable for paired samples. The tests are permutation-based and do not rely on distributional assumptions. One-sided Cramer-von Mises and Kolmogorov-Smirnov statistics are employed but the general idea may be utilized with other test statistics. The power to detect dominance and the different types of wrong decisions are investigated in an extensive simulation study. The proposed tests are applied to data from an experiment concerning the individual's willingness to pay for a given environmental improvement. (C) 2019 Elsevier Inc. All rights reserved.

Keywords

Stochastic dominance; Stochastic ordering; Four-hypothesis test; Permutation test; Nonparametric approach; Environmental psychology

Published in

Journal of Mathematical Psychology
2019, Volume: 93, article number: 102281

SLU Authors

• Ekström, Magnus

  • Department of Forest Resource Management, Swedish University of Agricultural Sciences
    
  • Umeå University

• Kriström, Bengt

  • Department of Forest Economics, Swedish University of Agricultural Sciences
    

UKÄ Subject classification

Probability Theory and Statistics
Psychology (excluding Applied Psychology)


Publication identifier

DOI: https://doi.org/10.1016/j.jmp.2019.102281

Permanent link to this page (URI)

https://res.slu.se/id/publ/103250