Strategic Manipulation of Empirical Tests

Alvaro Sandroni () and Wojciech Olszewski
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Alvaro Sandroni: Department of Economics, University of Pennsylvania

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

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.

Keywords: Testing; Strategic; Experts (search for similar items in EconPapers)
JEL-codes: D81 C11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse and nep-knm
Date: 2008-04-01
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Working Paper: Strategic Manipulation of Empirical Tests (2006)
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