How Do Behavioral Assumptions Affect Structural Inference? Evidence from a Laboratory Experiment
AbstractWe use laboratory experiments to investigate the effect that assuming rational expectations has on structural inference in a dynamic discrete decision problem. Our design induces preferences up to the subjective rate of time preference, leaving unrestricted both this parameter and subjects' decision rules. We estimate subjects' discount rates under the assumption that all subjects use the rational expectations decision rule, and under weaker behavioral assumptions that allow decision rule heterogeneity. We find that certain sophisticated heuristics fit subjects' decisions statistically significantly better than rational expectations. However, the rational expectations assumption does not distort inferences about the cross-sectional discount rate distribution.
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Bibliographic InfoArticle provided by American Statistical Association in its journal Journal of Business and Economic Statistics.
Volume (Year): 22 (2004)
Issue (Month): 1 (January)
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Other versions of this item:
- Daniel Houser & Joachim Winter, 2002. "How Do Behavioral Assumptions Affect Structural Inference? Evidence From A Laboratory Experiment," MEA discussion paper series 02005, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D90 - Microeconomics - - Intertemporal Choice - - - General
- C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
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