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Robust Confidence Regions for Incomplete Models

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  • Larry G. Epstein
  • Hiroaki Kaido
  • Kyoungwon Seo

Abstract

Call an economic model incomplete if it does not generate a probabilistic prediction even given knowledge of all parameter values. We propose a method of inference about unknown parameters for such models that is robust to heterogeneity and dependence of unknown form. The key is a Central Limit Theorem for belief functions; robust confidence regions are then constructed in a fashion paralleling the classical approach. Monte Carlo simulations support tractability of the method and demonstrate its enhanced robustness relative to existing methods.

Suggested Citation

  • Larry G. Epstein & Hiroaki Kaido & Kyoungwon Seo, 2016. "Robust Confidence Regions for Incomplete Models," Econometrica, Econometric Society, vol. 84, pages 1799-1838, September.
  • Handle: RePEc:wly:emetrp:v:84:y:2016:i::p:1799-1838
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