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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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  1. Drew Fudenberg & David K. Levine, 1996. "An Easier Way to Calibrate," Levine's Working Paper Archive 2059, David K. Levine.
  2. Ehud Kalai, 1995. "Calibrated Forecasting and Merging," Discussion Papers 1144, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Eddie Dekel & Yossi Feinberg, 2006. "Non-Bayesian Testing of a Stochastic Prediction," Discussion Papers 1418, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Drew Fudenberg & David K. Levine, 1997. "Conditional Universal Consistency," Levine's Working Paper Archive 471, David K. Levine.
  5. Alvaro Sandroni & Wojciech Olszewski, 2008. "Manipulability of Future-Independent Tests," PIER Working Paper Archive 08-014, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  6. Hart, Sergiu & Mas-Colell, Andreu, 2001. "A General Class of Adaptive Strategies," Journal of Economic Theory, Elsevier, vol. 98(1), pages 26-54, May.
  7. Yossi Feinberg & Colin Stewart, 2008. "Testing Multiple Forecasters," Econometrica, Econometric Society, vol. 76(3), pages 561-582, 05.
  8. Shmaya, Eran, 2008. "Many inspections are manipulable," Theoretical Economics, Econometric Society, vol. 3(3), September.
  9. Fudenberg, Drew & Levine, David, 1995. "Consistency and Cautious Fictitious Play," Scholarly Articles 3198694, Harvard University Department of Economics.
  10. S. Hart & A. Mas-Collel, 2010. "A Simple Adaptive Procedure Leading to Correlated Equilibrium," Levine's Working Paper Archive 572, David K. Levine.
  11. 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.
  12. 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.
  13. Nabil I. Al-Najjar & Jonathan Weinstein, 2008. "Comparative Testing of Experts," Econometrica, Econometric Society, vol. 76(3), pages 541-559, 05.
  14. Alvaro Sandroni, 2003. "The reproducible properties of correct forecasts," International Journal of Game Theory, Springer, vol. 32(1), pages 151-159, December.
  15. 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.
  16. Alvaro Sandroni & Wojciech Olszewski, 2008. "Falsifiability," PIER Working Paper Archive 08-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  17. Lehrer, Ehud, 2001. "Any Inspection Is Manipulable," Econometrica, Econometric Society, vol. 69(5), pages 1333-47, September.
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Citations

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Cited by:
  1. Wojciech Olszewski & Alvaro Sandroni, 2008. "Manipulability of Future-Independent Tests," Econometrica, Econometric Society, vol. 76(6), pages 1437-1466, November.
  2. 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.
  3. Dean Foster & Rakesh Vohra, 2011. "Calibration: Respice, Adspice, Prospice," Discussion Papers 1537, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Al-Najjar, Nabil & Sandroni, Alvaro, 2013. "A difficulty in the testing of strategic experts," Mathematical Social Sciences, Elsevier, vol. 65(1), pages 5-9.
  5. Hu, Tai Wei & Shmaya, Eran, 2013. "Expressible inspections," Theoretical Economics, Econometric Society, vol. 8(2), May.
  6. Colin Stewart, 2009. "Nonmanipulable Bayesian Testing," Working Papers tecipa-360, University of Toronto, Department of Economics.
  7. Yossi Feinberg & Colin Stewart, 2008. "Testing Multiple Forecasters," Econometrica, Econometric Society, vol. 76(3), pages 561-582, 05.
  8. Feinberg, Yossi & Lambert, Nicolas S., 2011. "Mostly Calibrated," Research Papers 2090, Stanford University, Graduate School of Business.

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