Alternative Approaches to Model Choice
Journal of Economic Behavior & Organization, Vol. 14, pp. 97-125, 1990
Posted: 28 May 2013 Last revised: 30 May 2013
Date Written: September 10, 1989
Accepted model choice procedures are characterized. Problems concerning the determination of significance levels for multiple tests, Type II errors for specification error tests, and the use of point null hypotheses are reviewed. The potential gains from greater reliance on sensitivity analysis, incorporation of uncertain prior information, and experimentation are discussed. Attention is turned then to models which are explicitly approximations, and to the need, in this context, for choice procedures that provide a basis for ranking models in terms of the relative goodness of the approximations they provide.
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