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Decision theory is the science of making optimal decisions in the face of uncertainty. Statistical decision theory is concerned with the making of decisions when in the presence of statistical knowledge (data) which sheds light on some of the uncertainties involved in the decision problem.
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Stochastic dominance and mean preserving spread
I need someones help on understanding the concepts of stochastic dominance and mean preserving spread. I have an exercise which could be used for explanation.
Consider the following lotteries:
L1 ={ …