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Strategic Manipulation of Empirical Tests

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  • Alvaro Sandroni

    ()
    (Department of Economics, University of Pennsylvania)

  • Wojciech Olszewski

    ()
    (Department of Economics, Northwestern University)

Abstract

Theories can be produced by experts seeking a reputation for having knowledge. Hence, a tester could anticipate that theories may have been strategically produced by uninformed experts who want to pass an empirical test. We show that, with no restriction on the domain of permissible theories, strategic experts cannot be discredited for an arbitrary but given number of periods, no matter which test is used (provided that the test does not reject the actual data-generating process). Natural ways around this impossibility result include 1) assuming that unbounded data sets are available and 2) restricting the domain of permissible theories (opening the possibility that the actual data-generating process is rejected out of hand). In both cases, it is possible to dismiss strategic experts, but only to a limited extent. These results show significant limits on what data can accomplish when experts produce theories strategically.

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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 08-015.

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Length: 30 pages
Date of creation: 01 Apr 2008
Date of revision:
Handle: RePEc:pen:papers:08-015

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Keywords: Testing Strategic Experts;

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References

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  8. Ehud Lehrer & Eilon Solan, 2003. "No-Regret with Bounded Computational Capacity," Discussion Papers 1373, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Drew Fudenberg & David K. Levine, 1996. "An Easier Way to Calibrate," Levine's Working Paper Archive 2059, David K. Levine.
  10. Vladimir Vovk & Glenn Shafer, 2005. "Good randomized sequential probability forecasting is always possible," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 67(5), pages 747-763.
  11. Sergiu Hart & Andreu Mas-Colell, 1996. "A simple adaptive procedure leading to correlated equilibrium," Economics Working Papers 200, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1996.
  12. Feinberg, Yossi & Stewart, Colin, 2007. "Testing Multiple Forecasters," Research Papers 1957, Stanford University, Graduate School of Business.
  13. Anderson Robert M. & Zame William R., 2001. "Genericity with Infinitely Many Parameters," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-64, February.
  14. Wojciech Olszewski & Alvaro Sandroni, 2008. "Manipulability of Future-Independent Tests," Econometrica, Econometric Society, vol. 76(6), pages 1437-1466, November.
  15. Lehrer, Ehud, 2001. "Any Inspection Is Manipulable," Econometrica, Econometric Society, vol. 69(5), pages 1333-47, September.
  16. Alvaro Sandroni, 2003. "The reproducible properties of correct forecasts," International Journal of Game Theory, Springer, vol. 32(1), pages 151-159, December.
  17. Nabil I. Al-Najjar & Jonathan Weinstein, 2006. "Comparative Testing of Experts," Levine's Working Paper Archive 321307000000000590, David K. Levine.
  18. Alvaro Sandroni & Wojciech Olszewski, 2008. "Falsifiability," PIER Working Paper Archive 08-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
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Cited by:
  1. Colin Stewart, 2009. "Nonmanipulable Bayesian Testing," Working Papers tecipa-360, University of Toronto, Department of Economics.
  2. Al-Najjar, Nabil & Sandroni, Alvaro, 2013. "A difficulty in the testing of strategic experts," Mathematical Social Sciences, Elsevier, vol. 65(1), pages 5-9.
  3. Wojciech Olszewski & Alvaro Sandroni, 2008. "Manipulability of Future-Independent Tests," Econometrica, Econometric Society, vol. 76(6), pages 1437-1466, November.
  4. Feinberg, Yossi & Lambert, Nicolas S., 2011. "Mostly Calibrated," Research Papers 2090, Stanford University, Graduate School of Business.
  5. Al-Najjar, Nabil I. & Sandroni, Alvaro & Smorodinsky, Rann & Weinstein, Jonathan, 2010. "Testing theories with learnable and predictive representations," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2203-2217, November.
  6. Hu, Tai Wei & Shmaya, Eran, 2013. "Expressible inspections," Theoretical Economics, Econometric Society, vol. 8(2), May.
  7. Feinberg, Yossi & Stewart, Colin, 2007. "Testing Multiple Forecasters," Research Papers 1957, Stanford University, Graduate School of Business.
  8. Dean Foster & Rakesh Vohra, 2011. "Calibration: Respice, Adspice, Prospice," Discussion Papers 1537, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

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