Abstract
There is an odd contradiction about much of the empirical (experimental) literature: The data is analysed using statistical tools which presuppose that there is some noise or randomness in the data, but the source and possible nature of the noise are rarely explicitly discussed. This paper argues that the noise should be brought out into the open, and its nature and implications openly discussed. Whether the statistical analysis involves testing or estimation, the analysis inevitably is built upon some assumed stochastic structure to the noise. Different assumptions justify different analyses, which means that the appropriate type of analysis depends crucially on the stochastic nature of the noise. This paper explores such issues and argues that ignoring the noise can be dangerous.
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JEL Classification: B41, C50, C91, D81
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Hey, J.D. Why We Should Not Be Silent About Noise. Exp Econ 8, 325–345 (2005). https://doi.org/10.1007/s10683-005-5373-8
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DOI: https://doi.org/10.1007/s10683-005-5373-8