Bounded Rationality and Limited Datasets

33 Pages Posted: 24 Feb 2020

See all articles by Geoffroy de Clippel

Geoffroy de Clippel

Brown University - Department of Economics

Kareen Rozen

Brown University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2018

Abstract

Bounded rationality theories are typically characterized over exhaustive data sets. We develop a methodology to understand the empirical content of such theories with limited data, adapting the classic, revealed-preference approach to new forms of revealed information. We apply our approach to an array of theories, illustrating its versatility. We identify theories and datasets testable in the same elegant way as Rationality, and theories and datasets where testing is more challenging. We show that previous attempts to test consistency of limited data with bounded rationality theories are subject to a conceptual pitfall that can yield false positives and empty out-of-sample predictions.

Suggested Citation

de Clippel, Geoffrey and Rozen, Kareen, Bounded Rationality and Limited Datasets (December 1, 2018). Available at SSRN: https://ssrn.com/abstract=3527064 or http://dx.doi.org/10.2139/ssrn.3527064

Geoffrey De Clippel (Contact Author)

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

Kareen Rozen

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

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