American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Robust Misspecified Models
American Economic Review
(pp. 1340–79)
Abstract
This paper studies which misspecified models are likely to persist when decision-makers compare them with competing models. The main result characterizes such models based on two features that can be derived from primitives: The model's asymptotic accuracy in predicting the equilibrium distribution of observed outcomes and the "tightness" of the prior around such equilibria. Misspecified models can be robust, persisting against any arbitrary competing model—including the true model—despite decision-makers observing an infinite amount of data. Moreover, simple misspecified models equipped with entrenched priors can be more robust than complex correctly specified models.Citation
Ba, Cuimin. 2026. "Robust Misspecified Models." American Economic Review 116 (4): 1340–79. DOI: 10.1257/aer.20240246Additional Materials
JEL Classification
- C11 Bayesian Analysis: General
- C52 Model Evaluation, Validation, and Selection
- D11 Consumer Economics: Theory
- L82 Entertainment; Media