Stochastic dominance is a concept used in decision theory and economics to compare different probability distributions, where one distribution is considered better than another based on expected utility. It provides a method to evaluate risky options by assessing which option will yield higher expected outcomes for all levels of utility. This concept relies heavily on cumulative distribution functions (CDFs), which illustrate the probability that a random variable takes a value less than or equal to a certain threshold, making it crucial for understanding risk and choice under uncertainty.
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