Identification and Estimation of Games with Incomplete Information Using Excluded Regressors
AbstractThe existing literature on binary games with incomplete information assumes that either payoff functions or the distribution of private information are finitely parameterized to obtain point identification. In contrast, we show that, given excluded regressors, payoff functions and the distribution of private information can both be nonparametrically point identified. An excluded regressor for player i is a sufficiently varying state variable that does not affect other players utility and is additively separable from other components in is payoff. We show how excluded regressors satisfying these conditions arise in contexts such as entry games between firms, as variation in observed components of fixed costs. Our identification proofs are constructive, so consistent nonparametric estimators can be readily based on them. For a semiparametric model with linear payoffs, we propose root-N consistent and asymptotically normal estimators for parameters in players payoffs. Finally, we extend our approach to accommodate the existence of multiple Bayesian Nash equilibria in the data-generating process without assuming equilibrium selection rules.
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Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 808.
Date of creation: 21 Aug 2012
Date of revision: 05 Mar 2013
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Games with Incomplete Information; Excluded Regressors; Nonparametric Identification; Semiparametric Estimation; Multiple Equilibria.;
Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-13 (All new papers)
- NEP-CTA-2012-10-13 (Contract Theory & Applications)
- NEP-ECM-2012-10-13 (Econometrics)
- NEP-GTH-2012-10-13 (Game Theory)
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- Aradillas-Lopez, Andres, 2010. "Semiparametric estimation of a simultaneous game with incomplete information," Journal of Econometrics, Elsevier, vol. 157(2), pages 409-431, August.
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