Stochastic dominance

Stochastic dominance is a form of stochastic ordering. The concept arises in decision theory and decision analysis in situations where one gamble (a probability distribution over possible outcomes, also known as prospects) can be ranked as superior to another gamble for a broad class of decision-makers. It is based on shared preferences regarding sets of possible outcomes and their associated probabilities. Only limited knowledge of preferences is required for determining dominance. Risk aversion is a factor only in second order stochastic dominance.