Strategic Manipulation of Empirical Tests

30 Pages Posted: 15 May 2008

See all articles by Wojciech Olszewski

Wojciech Olszewski

Northwestern University - Department of Economics

Alvaro Sandroni

University of Pennsylvania - Department of Economics; Northwestern University - Kellogg School of Management

Date Written: April 2008

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

JEL Classification: D81, C11

Suggested Citation

Olszewski, Wojciech and Sandroni, Alvaro, Strategic Manipulation of Empirical Tests (April 2008). PIER Working Paper No. 08-015, Available at SSRN: https://ssrn.com/abstract=1133118 or http://dx.doi.org/10.2139/ssrn.1133118

Wojciech Olszewski

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

Alvaro Sandroni (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5461 (Phone)
847-467-1220 (Fax)

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