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A Genetic Algorithm for the Structural Estimation of Games with Multiple Equilibria

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Author Info

  • Victor Aguirregabiria

    (Boston University)

  • Pedro Mira

    (CEMFI)

Abstract

This paper proposes an algorithm to obtain maximum likelihood estimates of structural parameters in discrete games with multiple equilibria. The method combines a genetic algorithm (GA) with a pseudo maximum likelihood (PML) procedure. The GA searches efficiently over the huge space of possible combinations of equilibria in the data. The PML procedure avoids the repeated computation of equilibria for each trial value of the parameters of interest. To test the ability of this method to get maximum likelihood estimates, we present a Monte Carlo experiment in the context of a game of price competition and collusion.

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File URL: http://128.118.178.162/eps/em/papers/0502/0502017.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Econometrics with number 0502017.

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Length: 18 pages
Date of creation: 28 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpem:0502017

Note: Type of Document - pdf; pages: 18
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Web page: http://128.118.178.162

Related research

Keywords: Empirical games; Maximum likelihood estimation; Multiple equilibria; Genetic algorithms.;

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References

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  1. Victor Aguirregabiria & Pedro Mira, 1999. "Swapping the Nested Fixed-Point Algorithm: a Class of Estimators for Discrete Markov Decision Models," Computing in Economics and Finance 1999 332, Society for Computational Economics.
  2. Martin Pesendorfer & Philipp Schmidt-Dengler, 2003. "Identification and Estimation of Dynamic Games," NBER Working Papers 9726, National Bureau of Economic Research, Inc.
  3. Hotz, V Joseph & Robert A. Miller & Seth Sanders & Jeffrey Smith, 1994. "A Simulation Estimator for Dynamic Models of Discrete Choice," Review of Economic Studies, Wiley Blackwell, vol. 61(2), pages 265-89, April.
  4. Patrick Bajari & C. Lanier Benkard & Jonathan Levin, 2007. "Estimating Dynamic Models of Imperfect Competition," Econometrica, Econometric Society, vol. 75(5), pages 1331-1370, 09.
  5. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
  6. Victor Aguirregabiria & Pedro Mira, 2004. "Sequential Estimation of Dynamic Discrete Games," Industrial Organization 0406006, EconWPA.
  7. Ariel Pakes & Michael Ostrovsky & Steve Berry, 2004. "Simple Estimators for the Parameters of Discrete Dynamic Games (with Entry/Exit Examples)," Harvard Institute of Economic Research Working Papers 2036, Harvard - Institute of Economic Research.
  8. Elie Tamer, 2003. "Incomplete Simultaneous Discrete Response Model with Multiple Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 70(1), pages 147-165, January.
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Cited by:
  1. Sumon Datta & K. Sudhir, 2012. "Does Reducing Spatial Differentiation Increase Product Differentiation? Effects of Zoning on Retail Entry and Format Variety," Cowles Foundation Discussion Papers 1851, Cowles Foundation for Research in Economics, Yale University, revised Sep 2012.
  2. Viauroux, Christelle, 2007. "Structural estimation of congestion costs," European Economic Review, Elsevier, vol. 51(1), pages 1-25, January.

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