Estimating Static Models of Strategic Interaction
AbstractWe propose a method for estimating static games of incomplete information. A static game is a generalization of a discrete choice model, such as a multinomial logit or probit, which allows the actions of a group of agents to be interdependent. Unlike most earlier work, the method we propose is semiparametric and does not require the covariates to lie in a discrete set. While the estimator we propose is quite flexible, we demonstrate that in most cases it can be easily implemented using standard statistical packages such as STATA. We also propose an algorithm for simulating the model which finds all equilibria to the game. As an application of our estimator, we study recommendations for high technology stocks between 1998-2003. We find that strategic motives, typically ignored in the empirical literature, appear to be an important consideration in the recommendations submitted by equity analysts.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12013.
Date of creation: Feb 2006
Date of revision:
Publication status: published as Estimating Static Models of Strategic Interactions (with Han Hong, John Krainer and Denis Nekipelov), Journal of Business and Economic Statistics Oct 2010, Vol. 28, No. 4, 469-482
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Other versions of this item:
- 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.
- L0 - Industrial Organization - - General
- L5 - Industrial Organization - - Regulation and Industrial Policy
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-26 (All new papers)
- NEP-DCM-2006-02-26 (Discrete Choice Models)
- NEP-ECM-2006-02-26 (Econometrics)
- NEP-GTH-2006-02-26 (Game Theory)
- NEP-ICT-2006-02-26 (Information & Communication Technologies)
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