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Abstract
A recent paper by Hardaker et al. (The Australian Journal of Agricultural and
Resource Economics, 48, 2004a, 253) and book by Hardaker et al. (Coping with Risk
in Agriculture, 2004b) describe a procedure for determining an efficient set from
among a set of random alternatives. This procedure, called stochastic efficiency with
respect to a function (SERF), is claimed to make the same assumption concerning the
risk aversion measures as does stochastic dominance with respect to a function
(SDRF). This is claim is incorrect. SERF imposes an additional requirement on the
risk aversion measures of the decision makers. Both procedures assume a lower and
an upper bound on risk aversion, but SERF also assumes that all risk aversion measures
are of the same functional form as these lower and upper bound functions. This
additional strong requirement on risk preferences implies that the efficient set identified
under SERF is usually smaller than that identified using SDRF.