Strategic behavior in regressions: an experimental

Javier Perote, Juan Perote-Peña and Marc Vorsatz

No 2012-07, Working Papers from FEDEA

Abstract: We study experimentally in the laboratory the situation when individuals have to report their private information (that is commonly known to be the sum of an observable and a random component) to a public authority that then makes inference about the true value hold by each of the individuals. It is assumed that individuals prefer this inferred or predicted value to be as close as possible to the their true value. Consistent with the theoretical literature, we show that the participants in our experiment misrepresent their private information more under the OLS than under the resistant line estimator (which extends the median voter theorem to the two{dimensional setting). Moreover, only the resistant line estimator is empirically unbiased and subjects earn significantly less if the OLS estimator is applied.

Date: 2012-10
New Economics Papers: this item is included in nep-cbe, nep-cta, nep-exp and nep-gth
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