Refutation-Resistant Beliefs

Lydia Mechtenberg, Dimitrios Xefteris and Galina Zudenkova

No 21818, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Beliefs often shape the very data used to evaluate them. We study a minimax refutation-resistance criterion that ranks misspecified beliefs by worst-case prediction error at their own induced action. In a linear two-activity model, the unique refutation-resistant belief equalizes inputs, is fully refutation-resistant, and coincides with the unique payoff-pessimistic belief, i.e., the belief minimizing predicted payoff. We then characterize the environments in which this equivalence between refutation resistance and payoff pessimism extends beyond the linear benchmark, and show that refutation resistance hinges on the existence of actions at which candidate technologies generate identical payoff predictions. This diagnostic structure allows us to delineate technology classes for which fully refutation-resistant beliefs exist and to identify when such beliefs are necessarily payoff-pessimistic.

Keywords: misspecified beliefs; endogenous testing; minimax refutation-resistance criterion; payoff pessimism (search for similar items in EconPapers)
JEL-codes: C52 D83 D91 (search for similar items in EconPapers)
Date: 2026-08
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