Deriving Predictions from Economic Theory : Solution Concepts vs. Epistemic Conditions

To derive predictions from economic theory, the literature conventionally proceeds by studying, or ‘solving’, said theory through the lens of a solution concept (e.g. Nash equilibrium). In this paper, we argue that theoretical predictions are more suitably derived from an explicit set of epistemic conditions, even (or especially) if the latter correspond to a canonical solution concept. To illustrate its broad applicability, enhanced transparency, and conceptual cogency, we apply the epistemic approach to various well-known economic theories