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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.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 114 (2012)
Issue (Month): 2 ()
Pages: 190-194

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Handle: RePEc:eee:ecolet:v:114:y:2012:i:2:p:190-194

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Structural models with multiple equilibria; Counterfactual experiments; Equilibrium selection; Homotopy methods;

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References

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  1. Timothy Dunne & Shawn D. Klimek & Mark J. Roberts & Daniel Yi Xu, 2009. "Entry, Exit, and the Determinants of Market Structure," NBER Working Papers 15313, National Bureau of Economic Research, Inc.
  2. Victor Aguirregabiria, 2004. "Pseudo Maximum Likelihood Estimation of Structural Models Involving Fixed-Point Problems," Econometrics 0402003, EconWPA.
  3. Allan Collard-Wexler, 2006. "Demand Fluctuations and Plant Turnover in the Ready-Mix Concrete Industry," Working Papers 06-25, New York University, Leonard N. Stern School of Business, Department of Economics.
  4. Doraszelski, Ulrich & Escobar, Juan, 2010. "A theory of regular Markov perfect equilibria in dynamic stochastic games: genericity, stability, and purification," Theoretical Economics, Econometric Society, vol. 5(3), September.
  5. Victor Aguirregabiria & Pedro Mira, 2004. "Sequential Estimation Of Dynamic Discrete Games," Working Papers wp2004_0413, CEMFI.
  6. J. Levin & P. Bajari, 2004. "Estimating Dynamic Models of Imperfect Competition," 2004 Meeting Papers 579, Society for Economic Dynamics.
  7. Stephen Ryan, 2006. "The Costs of Environmental Regulation in a Concentrated Industry," 2006 Meeting Papers 9, Society for Economic Dynamics.
  8. Brock,W.A. & Durlauf,S.N., 2000. "Discrete choice with social interactions," Working papers 7, Wisconsin Madison - Social Systems.
  9. Bajari, Patrick & Hong, Han & Krainer, John & Nekipelov, Denis, 2010. "Estimating Static Models of Strategic Interactions," Journal of Business & Economic Statistics, American Statistical Association, vol. 28(4), pages 469-482.
  10. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, January.
  11. Martin Pesendorfer & Philipp Schmidt-Dengler, 2008. "Asymptotic Least Squares Estimators for Dynamic Games -super-1," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 901-928.
  12. Ulrich Doraszelski & Mark Satterthwaite, 2010. "Computable Markov-perfect industry dynamics," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 215-243.
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Citations

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Cited by:
  1. 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.
  2. Victor Aguirregabiria & Victor Aguirregabiria & Aviv Nevo & Aviv Nevo, 2010. "Recent Developments in Empirical IO: Dynamic Demand and Dynamic Games," Working Papers tecipa-419, University of Toronto, Department of Economics.
  3. 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.
  4. Victor Aguirregabiria & Gustavo Vicentini, 2012. "Dynamic Spatial Competition Between Multi-Store Firms," Working Papers tecipa-457, University of Toronto, Department of Economics.
  5. Joao Macieira, 2010. "Oblivious Equilibrium in Dynamic Discrete Games," 2010 Meeting Papers 680, Society for Economic Dynamics.
  6. 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.
  7. Naoaki Minamihashi, 2012. "Natural Monopoly and Distorted Competition: Evidence from Unbundling Fiber-Optic Networks," Working Papers 12-26, Bank of Canada.

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