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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)

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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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Publisher 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
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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

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References listed on IDEAS
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. Ehud Kalai, 1995. "Calibrated Forecasting and Merging," Discussion Papers 1144, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  4. repec:bep:theadv:v:1:y:2001:i:advances/1/1:p:1003-1003 is not listed on IDEAS
  5. 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)
  6. Eddie Dekel & Yossi Feinberg, 2006. "Non-Bayesian Testing of a Stochastic Prediction," Review of Economic Studies, Blackwell Publishing, vol. 73(4), pages 893-906, October. [Downloadable!] (restricted)
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  7. 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!]
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  8. Drew Fudenberg & David K. Levine, 1997. "Conditional Universal Consistency," Levine's Working Paper Archive 471, David K. Levine. [Downloadable!]
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  9. Sergiu Hart & Andreu Mas-Colell, 2000. "A Simple Adaptive Procedure Leading to Correlated Equilibrium," Econometrica, Econometric Society, vol. 68(5), pages 1127-1150, September.
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  10. Alvaro Sandroni & Wojciech Olszewski, 2008. "Falsifiability," PIER Working Paper Archive 08-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
  11. Sergiu Hart & Andreu Mas-Colell, 1999. "A General Class of Adaptative Strategies," Economics Working Papers 373, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  12. Fudenberg, Drew & Levine, David K., 1995. "Consistency and cautious fictitious play," Journal of Economic Dynamics and Control, Elsevier, vol. 19(5-7), pages 1065-1089. [Downloadable!] (restricted)
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  13. Alvaro Sandroni, 2003. "The reproducible properties of correct forecasts," International Journal of Game Theory, Springer, vol. 32(1), pages 151-159, December. [Downloadable!] (restricted)
  14. 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!]
  15. Shmaya, Eran, 2008. "Many inspections are manipulable," Theoretical Economics, Society for Economic Theory, vol. 3(3), pages 367-382, September. [Downloadable!]
  16. Lehrer, Ehud, 2001. "Any Inspection Is Manipulable," Econometrica, Econometric Society, vol. 69(5), pages 1333-47, September.
  17. Yossi Feinberg & Colin Stewart, 2008. "Testing Multiple Forecasters," Econometrica, Econometric Society, vol. 76(3), pages 561-582, 05. [Downloadable!] (restricted)
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Cited by:
(explanations, 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. 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!]
    Other versions:
  2. Colin Stewart, 2009. "Nonmanipulable Bayesian Testing," Working Papers tecipa-360, University of Toronto, Department of Economics. [Downloadable!]
  3. Feinberg, Yossi & Stewart, Colin, 2007. "Testing Multiple Forecasters," Research Papers 1957, Stanford University, Graduate School of Business. [Downloadable!]
    Other versions:
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