Testable Restrictions of Nash Equilibrium in Games with Continuous Domains
This paper studies the falsifiability of the hypothesis of Nash behavior, for the case of a finite number of players who choose from continuous domains, subject to constraints. The results obtained here are negative. Assuming the observation of finite data sets, and using weak, but nontrivial, requirements for rationalizability, I show that the hypothesis is falsifiable, as it imposes nontautological, nonparametric testable restrictions. An assessment of these restrictions, however, shows that they are extremely weak, and that a researcher should expect, before observing the data set, that the test based on these restrictions will be passed by observed data. Without further specific assumptions, there do not exist harsher tests, since the conditions derived here also turn out to be suﬃcient. Moreover, ruling out the possibility that individuals may be cooperating so as to attain Pareto-eﬃcient outcomes is impossible, as this behavior is in itself unfalsifiable with finite data sets. Imposing aggregation, or strategic complementarity and/or substitutability, if theoretically plausible, may provide for a harsher test.
|Date of creation:||31 Jan 2003|
|Date of revision:|
|Contact details of provider:|| |
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.:
- Brown, Donald J & Matzkin, Rosa L, 1996.
"Testable Restrictions on the Equilibrium Manifold,"
Econometric Society, vol. 64(6), pages 1249-62, November.
- Bernheim, B Douglas, 1984.
"Rationalizable Strategic Behavior,"
Econometric Society, vol. 52(4), pages 1007-28, July.
- Sprumont, Yves, 2000. "On the Testable Implications of Collective Choice Theories," Journal of Economic Theory, Elsevier, vol. 93(2), pages 205-232, August.
- Indrajit Ray & Lin Zhou, .
"Game Theory Via Revealed Preferences,"
00/15, Department of Economics, University of York.
- Chiappori, Pierre-Andre & Rochet, Jean-Charles, 1987. "Revealed Preferences and Differentiable Demand: Notes and Comments," Econometrica, Econometric Society, vol. 55(3), pages 687-91, May.
- Varian, Hal R, 1983. "Non-Parametric Tests of Consumer Behaviour," Review of Economic Studies, Wiley Blackwell, vol. 50(1), pages 99-110, January.
- Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-50, July.
- Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
When requesting a correction, please mention this item's handle: RePEc:col:000094:003555. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Clorith Angélica Bahos Olivera)
If references are entirely missing, you can add them using this form.