Endogenous sample selection: A laboratory study

Ignacio Esponda · Emanuel Vespa

42 citations0/0 files storedQuantitative Economics

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Decision-Making and Behavioral Economics Experimental Behavioral Economics Studies Advanced Causal Inference Techniques

Abstract

Accounting for sample selection is a challenge not only for empirical researchers, but also for the agents populating our models. Yet most models abstract from these issues and assume that agents successfully tackle selection problems. We design an experiment where a person who understands selection observes all the data required to account for it. Subjects make choices under uncertainty and their choices reveal valuable information that is biased due to the presence of unobservables. We find that almost no subjects optimally account for endogenous selection. On the other hand, behavior is far from random, but actually quite amenable to analysis: Subjects follow simple heuristics that result in a partial accounting of selection and mitigate mistakes.

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References

2002Risk Aversion and Incentive Effects 1998The Theory of Learning in Games 1994Investigating Generalizations of Expected Utility Theory Using Experimental Data 1962An Experimental Study of Competitive Market Behavior 1996Information Aggregation, Rationality, and the Condorcet Jury Theorem 1991An Experimental Study of Competitive Market Behavior 2011The strategy versus the direct-response method: a first survey of experimental comparisons 2008Risk Aversion in the Laboratory

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