Bounded Rationality and Limited Datasets: Testable Implications, Identifiability, and Out-of-Sample Prediction

Geoffroy de Clippel and Kareen Rozen ()

No 2012-7, Working Papers from Brown University, Department of Economics

Abstract: Theories of bounded rationality are typically characterized over an exhaustive data set. This paper aims to operationalize some leading theories when the available data is limited, as is the case in most practical settings. How does one tell if observed choices are consistent with a theory of bounded rationality if the data is incomplete? What information can be identified about preferences? How can out-of-sample predictions be made? Our approach is contrasted with earlier attempts to examine bounded rationality theories on limited data, showing their notion of consistency is inappropriate for identifiability and out-of-sample prediction.

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Date: 2012
New Economics Papers: this item is included in nep-cbe, nep-for and nep-upt
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