Stochastic Dominance: A Methodological Approach to Enhancing the Conceptual Foundations of Operations Management Theory

Production/operations management (POM) research has traditionally preference ordered alternatives based on the expected values of outcomes for decision making under risk problems. The shortcomings of ignoring the uncertainty or variance of outcomes are discussed. A hypothetical example is provided to illustrate multiple moment and stochastic dominance preference ordering approaches and to demonstrate the theoretical superiority of stochastic dominance. Conclusions concerning the applicability of stochastic dominance approaches for POM research are presented.

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