Abstract

Abstract: The link between economic theory and experimental data is much tighter than is commonly supposed. Many presumed paradoxes arise because the theory is incorrectly applied. We go through several examples, emphasizing the theory as seen by a theorist. The main problem with the theory is that in some instances it lacks predictive power – We highlight where this is the case and current theoretical work designed to remedy the problem. 1 We are grateful to NSF grant SES-03-14713 for financial support, to Drew Fudenberg and Tom Palfrey for many conversations on this topic, to Colin Camerer for helpful comments and to Guillaume Freche for encouraging us to do this.

Citations