Bounded rationality and limited datasets

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 ar...

Full description

Saved in:
Bibliographic Details
Published inTheoretical economics Vol. 16; no. 2; pp. 359 - 380
Main Authors De Clippel, Geoffroy, Rozen, Kareen
Format Journal Article
LanguageEnglish
Published New Haven, CT The Econometric Society 2021
Subjects
Bounded rationality
limited data
revealed preference
Online AccessGet full text

Cover

More Information
Summary: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 may lead to false conclusions that the data is consistent with the theory.
ISSN:1555-7561
DOI:10.3982/TE4070