Improving the Efficiency of Stochastic Dominance Techniques Using Convex Set Stochastic Dominance

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Abstract
The advantages of convex set stochastic dominance (CSD) are discussed in terms of extending other stochastic dominance criteria in a way which will decrease Type II errors (large efficient sets) without increasing the Type I errors (inaccurate rankings). An empirical example ranking pest management strategies demonstrates the potential of CSD by reducing the efficiency set by almost 60% without imposing additional constraints on the preference set. It is suggested that CSD may permit more imprecise representations of risk preferences, avoiding utility measurement problems, and still identify efficient sets of acceptable sizes.

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