Testing for the Monotone Likelihood Ratio Assumption

Jutta Roosen and David Hennessy

Center for Agricultural and Rural Development (CARD) Publications from Center for Agricultural and Rural Development (CARD) at Iowa State University

Abstract: Monotonicity of the likelihood ratio for conditioned densities is a common technical assumption in economic models. But we have found no empirical tests for its plausibility. This paper develops such a test based on the theory of order-restricted inference, which is robust with respect to the correlation structure of the distributions being compared. We apply the test to study the technology revealed by agricultural production experiments. For the data under scrutiny, the results support the assumption of the monotone likelihood ratio. In a second application, we find some support for the assumption of affiliation among bids cast in a multiple-round Vickrey auction for a consumption good.

Keywords: affiliation; auction; likelihood ratio; order-restricted inference; stochastic order. (search for similar items in EconPapers)
JEL-codes: C1 D8 Q0 (search for similar items in EconPapers)
Date: 2003-02
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Related works:
Journal Article: Testing for the Monotone Likelihood Ratio Assumption (2004)
Working Paper: Testing for the Monotone Likelihood Ratio Assumption (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ias:cpaper:03-wp325

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