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Stochastic Dominance Michael H. Birnbaum Decision Research Center California State University, Fullerton SD is not only normative, but is assumed or implied by many descriptive theories. We can test the property to test between the class of models that satisfies and the class that violates this property. CPT satisfies SD CPT, RDU, RSDU, EU and many other models satisfy first order stochastic dominance. RAM, TAX, GDU, OPT, and others violate the property. We can test between two classes of theories by testing SD. Design studies to test specific predictions by RAM/TAX models. SD is an acceptable normative principle It is hard to construct a convincing argument that anyone should violate SD. Understanding when and why violations occur has both practical and theoretical value. Cumulative Prospect Theory/ Rank-Dependent Utility (RDU) Cumulative Prospect Theory/ RDU Tversky Kahneman (1992) CPT is more general than EU or (1979) PT, accounts for risk-seeking, risk aversion, sales and purchase of gambles insurance. Accounts for Allais Paradoxes, chief evidence against EU theory. Implies certain violations of restricted branch independence. Shared Nobel Prize in Econ. (2002) RAM Model RAM Model Parameters RAM implies inverse-S TAX Model TAX, like RAM, assumes that weight is affected by probability by a power function, t(p) = pg. Weight is also transferred from branches leading to higher consequences to branches leading to lower consequences. Special TAX Model “Prior” TAX Model TAX also implies inverse-S Recipe for Violations In 1996, I was asked to show that the “configural weight models” are different from other rank-dependent models. Derived some tests, including UCI and LCI, published them in 1997. Juan Navarrete and I then set out to test these predictions. Analysis of Stochastic Dominance Transitivity: A f B and B f C ? A f C Coalescing: GS = (x, p; x, q; z, r) ~ G = (x, p + q; z, r) Consequence Monotonicity: Stochastic Dominance Preferences Satisfy Stochast