TESTING FOR THE MONOTONE LIKELIHOOD RATIO ASSUMPTION

Monotonicity of the likelihood ratio for conditioned densities is a common technical assumption in economic models. But we have found no empirical tests for its plausibility. This paper develops such a test based on the theory of order-restricted inference, which is robust with respect to the correlation structure of the distributions being compared. We apply the test to study the technology revealed by agricultural production experiments. For the data under scrutiny, the results support the assumption of the monotone likelihood ratio. In a second application, we find some support for the assumption of affiliation among bids cast in a multiple-round Vickrey auction for a consumption good.


Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/18398
Total Pages:
25
Series Statement:
CARD Working Paper 03-WP 325




 Record created 2017-04-01, last modified 2017-04-04

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