The Korean Economic Review
Comparative Statics under Uncertainty with the Monotone Probability Ratio Order Revisited
Suyeol Ryu (Andong National University), Iltae Kim (Chonnam National University) and Soo-Jong Kim (The Board of Audit and Inspection of Korea)Year 2010Vol. 26No. 1
Abstract
This paper proposes a ‘left-side monotone likelihood ratio’ (L-MLR) order which is a more restrictive concept than the ‘monotone probability ratio’ (MPR) order and generalizes the comparative static result for the MPR change to the non-linear case in the standard one-argument decision model. The L-MLR defines an order on random distribution that lies between ‘monotone likelihood ratio’ (MLR) and MPR. Transitivity, however, does not hold for L-MLR and we show that an important relationship exists between the orders, L-MLR and MPR. This paper also shows that an MPR change can always be decomposed into a sequence of L-MLR shifts.