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Structural Estimation and Counterfactual Experiments in Games when the Data Come from Multiple Equilibria
| Citations: | 4 - 3 self |
BibTeX
@MISC{Aguirregabiria_structuralestimation,
author = {Victor Aguirregabiria and Pedro Mira and Simon Lee and Artyom Shneyerov and Seminar Participants},
title = {Structural Estimation and Counterfactual Experiments in Games when the Data Come from Multiple Equilibria},
year = {}
}
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Abstract
Preliminary and Incomplete Version This paper deals with estimation and prediction of discrete games of incomplete information when the data come from multiple equilibria. Most recent work in the econometrics of games has advocated two-step estimation methods which rely on the assumption that, even if the model has multiple equilibria, a single equilibrium is played in the data. We relax this assumption and study the identification and estimation of this class of models when we impose weak conditions on the equilibrium selection mechanism. First, we present results on the point-identification of structural parameters and equilibrium selection mechanism. Second, we propose an estimation procedure that combines the NPL method in Aguirregabiria and Mira (2002, 2007) with a genetic algorithm. This method maximizes the sample criterion function with respect to the equilibrium types that generate the observations in the data. We test the ability of this procedure to obtain consistent estimates using Monte Carlo experiments. Third, we investigate how the estimated model, including the estimated equilibrium selection mechanism, can be used to predict the equilibrium outcome associated with a counterfactual change in structural parameters. Finally, we apply these estimation and prediction methods to a model of entry-exit in local markets using data from the fast food retail industry in UK.
Keyphrases
multiple equilibrium counterfactual experiment data come structural estimation equilibrium selection mechanism structural parameter estimated equilibrium selection mechanism two-step estimation method consistent estimate single equilibrium fast food retail industry npl method equilibrium outcome sample criterion function counterfactual change estimation procedure prediction method recent work local market monte carlo experiment weak condition discrete game incomplete version genetic algorithm incomplete information
