Optimal transportation and the falsifiability of incompletely specified economic models

Ivar Ekeland; Alfred Galichon; Marc Henry

doi:10.1007/s00199-008-0432-y

Optimal transportation and the falsifiability of incompletely specified economic models

Ivar Ekeland, Alfred Galichon, Marc Henry

Research output: Contribution to journal › Article › peer-review

Abstract

A general framework is given to analyze the falsifiability of economic models based on a sample of their observable components. It is shown that, when the restrictions implied by the economic theory are insufficient to identify the unknown quantities of the structure, the duality of optimal transportation with zero-one cost function delivers interpretable and operational formulations of the hypothesis of specification correctness from which tests can be constructed to falsify the model.

Original language	English (US)
Pages (from-to)	355-374
Number of pages	20
Journal	Economic Theory
Volume	42
Issue number	2
DOIs	https://doi.org/10.1007/s00199-008-0432-y
State	Published - Nov 2009

Keywords

Incompletely specified models
Optimal transportation

ASJC Scopus subject areas

Economics and Econometrics

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10.1007/s00199-008-0432-y

Cite this

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abstract = "A general framework is given to analyze the falsifiability of economic models based on a sample of their observable components. It is shown that, when the restrictions implied by the economic theory are insufficient to identify the unknown quantities of the structure, the duality of optimal transportation with zero-one cost function delivers interpretable and operational formulations of the hypothesis of specification correctness from which tests can be constructed to falsify the model.",

keywords = "Incompletely specified models, Optimal transportation",

author = "Ivar Ekeland and Alfred Galichon and Marc Henry",

note = "Funding Information: This paper results as the combination of two manuscript circulated under the respective titles “Part 1: Parametric restrictions on latent variables” by A. Galichon and M. Henry, and “Part 2: Moment restrictions on latent variables” by the three authors. Financial support from NSF grant SES 0532398 is gratefully acknowledged by the three authors. Alfred Galichon{\textquoteright}s research is partly supported by Chaire X-Dauphine-EDF-Calyon “Finance et D{\'e}veloppement Durable”. ",

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doi = "10.1007/s00199-008-0432-y",

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N2 - A general framework is given to analyze the falsifiability of economic models based on a sample of their observable components. It is shown that, when the restrictions implied by the economic theory are insufficient to identify the unknown quantities of the structure, the duality of optimal transportation with zero-one cost function delivers interpretable and operational formulations of the hypothesis of specification correctness from which tests can be constructed to falsify the model.

AB - A general framework is given to analyze the falsifiability of economic models based on a sample of their observable components. It is shown that, when the restrictions implied by the economic theory are insufficient to identify the unknown quantities of the structure, the duality of optimal transportation with zero-one cost function delivers interpretable and operational formulations of the hypothesis of specification correctness from which tests can be constructed to falsify the model.

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Optimal transportation and the falsifiability of incompletely specified economic models

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Keywords

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