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Econometric analysis of games with multiple equilibria

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  • Aureo de Paula

    (Institute for Fiscal Studies and University of Pennsylvania)

Abstract

This article reviews the recent literature on the econometric analysis of games where multiple solutions are possible. Multiplicity does not necessarily preclude the estimation of a particular model (and in certain cases even improves its identification), but ignoring it can lead to misspecifications. The survey starts with a general characterisation of structural models that highlights how multiplicity affects the classical paradigm. Because the information structure is an important guide to identification and estimation strategies, I discuss games of complete and incomplete information separately. Whereas many of the techniques discussed in the article can be transported across different information environments, some of them are specific to particular models. I also survey models of social interactions in a different section. I close with a brief discussion of post-estimation issues and research prospects.

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Bibliographic Info

Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP29/12.

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Date of creation: Oct 2012
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Handle: RePEc:ifs:cemmap:29/12

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Keywords: Identification; multiplicity; games; social interactions;

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References

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  1. Patrick Bajari & C. Lanier Benkard & Jonathan Levin, 2004. "Estimating Dynamic Models of Imperfect Competition," NBER Working Papers 10450, National Bureau of Economic Research, Inc.
  2. Aradillas-Lopez, Andres & Tamer, Elie, 2008. "The Identification Power of Equilibrium in Simple Games," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 261-310.
  3. de Paula, Áureo, 2009. "Inference in a synchronization game with social interactions," Journal of Econometrics, Elsevier, vol. 148(1), pages 56-71, January.
  4. Federico Ciliberto & Elie Tamer, 2009. "Market Structure and Multiple Equilibria in Airline Markets," Econometrica, Econometric Society, vol. 77(6), pages 1791-1828, November.
  5. repec:bla:restud:v:77:y:2010:i:3:p:1138-1163 is not listed on IDEAS
  6. Bo E. Honor & �ureo De Paula, 2010. "Interdependent Durations," Review of Economic Studies, Oxford University Press, vol. 77(3), pages 1138-1163.
  7. Brock,W.A. & Durlauf,S.N., 2004. "Identification of binary choice models with social interactions," Working papers 2, Wisconsin Madison - Social Systems.
  8. Victor Aguirregabiria & Pedro Mira, 2004. "Sequential Estimation of Dynamic Discrete Games," Industrial Organization 0406006, EconWPA.
  9. Arie Beresteanu & Ilya Molchanov & Francesca Molinari, 2009. "Sharp identification regions in models with convex predictions: games, individual choice, and incomplete data," CeMMAP working papers CWP27/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  10. Aradillas-Lopez, Andres, 2010. "Semiparametric estimation of a simultaneous game with incomplete information," Journal of Econometrics, Elsevier, vol. 157(2), pages 409-431, August.
  11. Andrea Moro, 2003. "The Effect Of Statistical Discrimination On Black-White Wage Inequality: Estimating A Model With Multiple Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 467-500, 05.
  12. Áureo de Paula & Xun Tang, 2012. "Inference of Signs of Interaction Effects in Simultaneous Games With Incomplete Information," Econometrica, Econometric Society, vol. 80(1), pages 143-172, 01.
  13. Ariel Pakes & Michael Ostrovsky & Steve Berry, 2004. "Simple Estimators for the Parameters of Discrete Dynamic Games (with Entry/Exit Samples)," NBER Working Papers 10506, National Bureau of Economic Research, Inc.
  14. 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.
  15. repec:oup:restud:v:78:y::i:4:p:1264-1298 is not listed on IDEAS
  16. Kasy, Maximilian, 2011. "Nonparametric inference on the number of equilibria," Working Paper 32847, Harvard University OpenScholar.
  17. Federico Echenique & Ivana Komunjer, 2009. "Testing Models With Multiple Equilibria by Quantile Methods," Econometrica, Econometric Society, vol. 77(4), pages 1281-1297, 07.
  18. Hahn, Jinyong & Moon, Hyungsik Roger, 2010. "Panel Data Models With Finite Number Of Multiple Equilibria," Econometric Theory, Cambridge University Press, vol. 26(03), pages 863-881, June.
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Cited by:
  1. Nianqing Liu & Quang Vuong & Haiqing Xu, 2012. "Rationalization and Identification of Discrete Games with Correlated Types," Department of Economics Working Papers 130915, The University of Texas at Austin, Department of Economics.
  2. Sokbae 'Simon' Lee & Kyungchul Song & Yoon-Jae Whang, 2014. "Testing for a general class of functional inequalities," CeMMAP working papers CWP09/14, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  3. Tobias Stoehr, 2013. "Intra-Family Migration Decisions and Elderly Left Behind," Kiel Working Papers 1858, Kiel Institute for the World Economy.
  4. Che-Lin Su, 2014. "Estimating discrete-choice games of incomplete information: Simple static examples," Quantitative Marketing and Economics, Springer, vol. 12(2), pages 167-207, June.

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