Estimation of Dynamic Discrete Choice Models in Continuous Time with an Application to Retail Competition
AbstractThis paper provides a method for estimating and solving dynamic discrete choice models in a continuous time framework that is computationally light. The method is particularly useful in dynamic games. In the proposed framework, players face a standard dynamic discrete choice problem at decision times that occur stochastically. The resulting stochastic-sequential structure naturally admits the use of CCP methods for estimation and makes it possible to compute counterfactual simulations for relatively high-dimensional games. We apply our techniques to examine the impact of Walmart’s entry into the retail grocery industry, showing that even the threat of entry by Walmart has a substantial effect on market structure.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18449.
Date of creation: Oct 2012
Date of revision:
Note: IO TWP
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-20 (All new papers)
- NEP-COM-2012-10-20 (Industrial Competition)
- NEP-DCM-2012-10-20 (Discrete Choice Models)
- NEP-ECM-2012-10-20 (Econometrics)
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