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Strategic Manipulation of Empirical Tests

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Author Info
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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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
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Handle: RePEc:pen:papers:08-015

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Related research
Keywords: Testing Strategic Experts

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Find related papers by JEL classification:
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis

This paper has been announced in the following NEP Reports:

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Nabil I. Al-Najjar & Jonathan Weinstein, 2008. "Comparative Testing of Experts," Econometrica, Econometric Society, vol. 76(3), pages 541-559, 05. [Downloadable!] (restricted)
  2. Fudenberg, Drew & Levine, David K., 1999. "An Easier Way to Calibrate," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 131-137, October. [Downloadable!] (restricted)
    Other versions:
  3. Alvaro Sandroni, 2003. "The reproducible properties of correct forecasts," International Journal of Game Theory, Springer, vol. 32(1), pages 151-159, December. [Downloadable!] (restricted)
  4. 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. [Downloadable!]
  5. Hart, Sergiu & Mas-Colell, Andreu, 2001. "A General Class of Adaptive Strategies," Journal of Economic Theory, Elsevier, vol. 98(1), pages 26-54, May. [Downloadable!] (restricted)
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  6. 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. [Downloadable!]
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  7. Robert Anderson & William Zame, 2001. "Genericity with Infinitely Many Parameters," Advances in Theoretical Economics, Berkeley Electronic Press, vol. 1(advances/), pages 1003-1003. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
  9. 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. [Downloadable!]
  10. Shmaya, Eran, 2008. "Many inspections are manipulable," Theoretical Economics, Society for Economic Theory, vol. 3(3), pages 367-382, September. [Downloadable!]
  11. Kalai, Ehud & Lehrer, Ehud & Smorodinsky, Rann, 1999. "Calibrated Forecasting and Merging," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 151-169, October. [Downloadable!] (restricted)
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  12. Yossi Feinberg & Colin Stewart, 2008. "Testing Multiple Forecasters," Econometrica, Econometric Society, vol. 76(3), pages 561-582, 05. [Downloadable!] (restricted)
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