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Title:Bounded rationality and limited datasets: Testable implications, identifiability, and out-of-sample prediction PDF Logo
Authors:de Clippely, Geoffroy
Rozen, Kareen
Issue Date:2012
Series/Report no.:Working Paper, Brown University, Department of Economics 2012-7
Abstract:Theories of bounded rationality are typically characterized over an exhaustive data set. This paper aims to operationalize some leading theories when the available data is limited, as is the case in most practical settings. How does one tell if observed choices are consistent with a theory of bounded rationality if the data is incomplete? What information can be identified about preferences? How can out-of-sample predictions be made? Our approach is contrasted with earlier attempts to examine bounded rationality theories on limited data, showing their notion of consistency is inappropriate for identifiability and out-of-sample prediction.
Document Type:Working Paper
Appears in Collections:Working Papers, Department of Economics, Brown University

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