Stochastic Dominance and the Maximization of Expected Utility

In attempting to construct a general framework for the analysis of choice under uncertainty, researchers have long sought to establish reasonable criteria for the selection of one prospect over another.Among current researchers the concept of stochastic dominance 1 has attracted considerable attention.This paper attempts to clarify and generalize certain basic relationships between stochastic dominance and the maximization of expected utility.The paper begins with a critique of an article by Giora Hanoch and Haim Levy [lJ.Although Hanoch and Levy propose a series of interesting theorems relating stochastic dominance to the maximization of expected utility, errors appear in the statement and proof of these theorems which prevent (or should prevent) the researcher from using them directly.The necessary modifications are given in Part I below.An undesirable feature of many articles in the area of stochastic dominance are the regularity conditions imposed on the utility functions (e.g., bounded, differentiable) and the random variables (e.g., absolutely continuous distribution function, nonnegative).The important 1971