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Testing Models with Multiple Equilibria by Quantile Methods

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  • Ivana Komunjer
  • Federico Echenique

Abstract

In this paper, we present methods for deriving testable implication from models with multiple equilibria. Our framework includes many economic models with a one-dimensional endogenous variable---examples are macroeconomic growth models (Solow, 1956), partial equilibrium models, and games of strategic complementarities. Unlike traditionally assumed in the literature, the multiple equilibria models considered here have no implications for the conditional mean of the endogenous variable. We show that such models typically have strong implications for the tail of the conditional distribution of the endogenous variable. We present an econometric framework for testing these implications which reposes on quantile methods and extreme-value theory. We construct a novel order-restricted test based on conditional quantiles of the endogenous variable rather than its mean, which distinguishes our approach from commonly used tests similar to that of Bartholomew (1959)

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 447.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:447

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Related research

Keywords: multiple equilibria; quantile regression; extreme-value theory; order-restricted inference;

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Cited by:
  1. Alberto Bisin & Andrea Moro & Giorgio Topa, 2011. "The Empirical Content of Models with Multiple Equilibria in Economies with Social Interactions," NBER Working Papers 17196, National Bureau of Economic Research, Inc.
  2. Rabah Amir & Natalia Lazzati, 2010. "Network Effects, Market Structure and Industry Performance," CREA Discussion Paper Series 10-16, Center for Research in Economic Analysis, University of Luxembourg.
  3. Rai, Yoshiyasu & Otsu, Taisuke, 2013. "On testability of complementarity in models with multiple equilibria," Economics Letters, Elsevier, vol. 120(1), pages 79-82.
  4. repec:bos:wpaper:wp2013-001 is not listed on IDEAS
  5. �ureo de Paula, 2013. "Econometric Analysis of Games with Multiple Equilibria," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 107-131, 05.
  6. Vincent P. Crawford & Miguel A. Costa-Gomes & Nagore Iriberri, 2010. "Strategic Thinking," Levine's Working Paper Archive 661465000000001148, David K. Levine.
  7. Camargo, Braz & Pastorino, Elena, 2012. "Career concerns: A human capital perspective," Textos para discussão 288, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  8. Komunjer, Ivana, 2008. "Global Identification In Nonlinear Semiparametric Models," University of California at San Diego, Economics Working Paper Series qt2r59d87f, Department of Economics, UC San Diego.
  9. Giorgio Topa & Elizabeth Setren & Meta Brown, 2011. "Do Referrals Lead to Better Matches? Evidence from a Firm's Employee," 2011 Meeting Papers 711, Society for Economic Dynamics.
  10. Ron N. Borkovsky & Paul B. Ellickson & Brett R. Gordon & Victor Aguirregabiria & Gardete Pedro, 2014. "Multiplicity of Equilibria and Information Structures in Empirical Games: Challenges and Prospects," Working Papers tecipa-510, University of Toronto, Department of Economics.

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