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Recombinant estimation for normal-form games, with applications to auctions and bargaining

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  • Mullin, Charles H.
  • Reiley, David H.

Abstract

In empirical analysis of economic games, researchers frequently wish to estimate quantities describing group outcomes, such as the expected revenue in an auction or the mean allocative efficiency in a market experiment. For such applications, we propose an improved statistical estimation technique called "recombinant estimation." The technique takes observations of the complete strategy of each player and recombines them to compute all the possible group outcomes which could have resulted from different matches of players. We calculate the improvement in efficiency of the recombinant estimator relative to the standard estimator, and show how to estimate standard errors for the recombinant estimator for use in hypothesis testing. We present an application to a two-player sealed-bid auction and a two-player ultimatum bargaining game. In these applications, the improved efficiency of our estimator is equivalent to an increase of between 40% and 200% in the sample size. We discuss how to design game experiments in order to be able to take full advantage of recombinant estimation. Finally, we discuss practical computational issues, showing how one can avoid combinatorial explosions of computing time while still yielding significantly improved efficiency of estimation.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 54 (2006)
Issue (Month): 1 (January)
Pages: 159-182

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Handle: RePEc:eee:gamebe:v:54:y:2006:i:1:p:159-182

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Web page: http://www.elsevier.com/locate/inca/622836

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  1. Kagel, J.H. & Levin, D., 1988. "Independent Private Value Auctions: Bidder Behavior In First, Second And Third-Price Auctions With Varying Numbers Of Bidders," Papers 13, Houston - Department of Economics.
  2. Mitzkewitz, Michael & Nagel, Rosemarie, 1993. "Experimental Results on Ultimatum Games with Incomplete Information," International Journal of Game Theory, Springer, vol. 22(2), pages 171-98.
  3. Friedman, Daniel, 1996. "Equilibrium in Evolutionary Games: Some Experimental Results," Economic Journal, Royal Economic Society, vol. 106(434), pages 1-25, January.
  4. Robert Moir, 1998. "A Monte Carlo Analysis of the Fisher Randomization Technique: Reviving Randomization for Experimental Economists," Experimental Economics, Springer, vol. 1(1), pages 87-100, June.
  5. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November.
  6. Mehta, Judith & Starmer, Chris & Sugden, Robert, 1994. "The Nature of Salience: An Experimental Investigation of Pure Coordination Games," American Economic Review, American Economic Association, vol. 84(3), pages 658-73, June.
  7. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. David Lucking-Reiley & John A. List, 2000. "Demand Reduction in Multiunit Auctions: Evidence from a Sportscard Field Experiment," American Economic Review, American Economic Association, vol. 90(4), pages 961-972, September.
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Cited by:
  1. Pintér, Ágnes & Veszteg, Róbert F., 2010. "Minority vs. majority: An experimental study of standardized bids," European Journal of Political Economy, Elsevier, vol. 26(1), pages 36-50, March.
  2. Jason Abrevaya, 2008. "On recombinant estimation for experimental data," Experimental Economics, Springer, vol. 11(1), pages 25-52, March.
  3. Raul Lopez-Perez & Agnes Pinter & Hubert Janos Kiss, 2013. "Does Payoff Equity Facilitate Coordination? A test of Schelling's Conjecture," IEHAS Discussion Papers 1346, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  4. Yan Chen & Sherry Xin Li, 2009. "Group Identity and Social Preferences," American Economic Review, American Economic Association, vol. 99(1), pages 431-57, March.
  5. Garratt, Rod & Walker, Mark & Wooders, John, 2004. "Behavior in Second-Price Auctions by Highly Experienced eBay Buyers and Sellers," University of California at Santa Barbara, Economics Working Paper Series qt7s72r56p, Department of Economics, UC Santa Barbara.
  6. Bergstrom, Carl T. & Bergstrom, Ted C & Garratt, Rod, 2009. "Ideal Bootstrapping and Exact Recombination: Applications to Auction Experiments," University of California at Santa Barbara, Economics Working Paper Series qt4xb7454q, Department of Economics, UC Santa Barbara.

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