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A method for implementing counterfactual experiments in models with multiple equilibria

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  • Aguirregabiria, Victor

Abstract

This paper proposes a homotopy method for implementing counterfactual experiments in empirical models with multiple equilibria. A key assumption is that the equilibrium selection function does not jump discontinuously between equilibria as we continuously change the structural parameters.

Suggested Citation

  • Aguirregabiria, Victor, 2012. "A method for implementing counterfactual experiments in models with multiple equilibria," Economics Letters, Elsevier, vol. 114(2), pages 190-194.
    • Handle: RePEc:eee:ecolet:v:114:y:2012:i:2:p:190-194
    DOI: 10.1016/j.econlet.2011.09.041
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    10. Timothy Dunne & Shawn D. Klimek & Mark J. Roberts & Daniel Yi Xu, 2013. "Entry, exit, and the determinants of market structure," RAND Journal of Economics, RAND Corporation, vol. 44(3), pages 462-487, September.
    11. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
    12. Aguirregabiria, Victor, 2004. "Pseudo maximum likelihood estimation of structural models involving fixed-point problems," Economics Letters, Elsevier, vol. 84(3), pages 335-340, September.
    13. Ariel Pakes & Michael Ostrovsky & Steven Berry, 2007. "Simple estimators for the parameters of discrete dynamic games (with entry/exit examples)," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 373-399, June.
    14. Victor Aguirregabiria & Pedro Mira, 2007. "Sequential Estimation of Dynamic Discrete Games," Econometrica, Econometric Society, vol. 75(1), pages 1-53, January.
    15. Martin Pesendorfer & Philipp Schmidt-Dengler, 2008. "Asymptotic Least Squares Estimators for Dynamic Games -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 901-928.
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    Cited by:

    1. Naoaki Minamihashi, 2012. "Natural Monopoly and Distorted Competition: Evidence from Unbundling Fiber-Optic Networks," Staff Working Papers 12-26, Bank of Canada.
    2. Joao Macieira, 2010. "Oblivious Equilibrium in Dynamic Discrete Games," 2010 Meeting Papers 680, Society for Economic Dynamics.
    3. Aguirregabiria, Victor & Nevo, Aviv, 2010. "Recent developments in empirical IO: dynamic demand and dynamic games," MPRA Paper 27814, University Library of Munich, Germany.
    4. Jean-Pierre Dubé & Xueming Luo & Zheng Fang, 2015. "Self-Signaling and Prosocial Behavior: a Cause Marketing Mobile Field Experiment," NBER Working Papers 21475, National Bureau of Economic Research, Inc.
    5. Haizhen Lin, 2015. "Quality Choice And Market Structure: A Dynamic Analysis Of Nursing Home Oligopolies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(4), pages 1261-1290, November.
    6. Victor Aguirregabiria & Gustavo Vicentini, 2006. "Dynamic Spatial Competition Between Multi-Store Firms," Working Papers tecipa-253, University of Toronto, Department of Economics.
    7. Aguirregabiria, Victor & Ho, Chun-Yu, 2010. "A dynamic game of airline network competition: Hub-and-spoke networks and entry deterrence," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 377-382, July.
    8. Nathan Yang, 2011. "An Empirical Model of Industry Dynamics with Common Uncertainty and Learning from the Actions of Competitors," Working Papers 11-16, NET Institute.
    9. Besanko, David & Doraszelski, Ulrich & Kryukov, Yaroslav, 2011. "The economics of predation: What drives pricing when there is learning-by-doing?," CEPR Discussion Papers 8708, C.E.P.R. Discussion Papers.
    10. Victor Aguirregabiria & Gustavo Vicentini, 2016. "Dynamic Spatial Competition Between Multi-Store Retailers," Journal of Industrial Economics, Wiley Blackwell, vol. 64(4), pages 710-754, December.

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    More about this item

    Keywords

    Structural models with multiple equilibria; Counterfactual experiments; Equilibrium selection; Homotopy methods;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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