Robust Tests of Model Incompleteness in the Presence of Nuisance Parameters

EI seminar
Puzzle pieces on the floor almost connected to each other
Hiroaki Kaido
Thursday 12 Oct 2023, 12:00 - 13:00
E Building
Campus Woudestein
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Puzzle pieces on the floor almost connected to each other

Economic models may exhibit incompleteness depending on whether or not they admit certain policy-relevant features such as strategic interaction, self-selection, or state dependence.

(With Shuowen Chen)

We develop a novel test of model incompleteness and analyze its asymptotic properties. A key observation is that one can define a least-favorable parametric model along which detecting local alternatives without knowing the selection mechanism is the hardest. The test builds on a score function constructed from such a model. The proposed procedure remains computationally tractable even in the presence of nuisance parameters because it suffices to estimate them only under the null hypothesis of model completeness.

We illustrate the test by applying it to a market entry model and a triangular model with a set-valued control function.


You can sign up for this seminar by sending an email to The lunch will be provided (vegetarian option included).


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ESE - Airplane

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