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Market Structure and Multiple Equilibria in Airline Markets

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  • Federico Ciliberto
  • Elie Tamer

Abstract

We provide a practical method to estimate the payoff functions of players in complete information, static, discrete games. With respect to the empirical literature on entry games originated by Bresnahan and Reiss (1990) and Berry (1992), the main novelty of our framework is to allow for general forms of heterogeneity across players without making equilibrium selection assumptions. We allow the effects that the entry of each individual airline has on the profits of its competitors, its "competitive effects," to differ across airlines. The identified features of the model are sets of parameters (partial identification) such that the choice probabilities predicted by the econometric model are consistent with the empirical choice probabilities estimated from the data. Copyright 2009 The Econometric Society.

Suggested Citation

  • Federico Ciliberto & Elie Tamer, 2009. "Market Structure and Multiple Equilibria in Airline Markets," Econometrica, Econometric Society, vol. 77(6), pages 1791-1828, November.
  • Handle: RePEc:ecm:emetrp:v:77:y:2009:i:6:p:1791-1828
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    References listed on IDEAS

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    1. Arie Beresteanu & Francesca Molinari, 2008. "Asymptotic Properties for a Class of Partially Identified Models," Econometrica, Econometric Society, vol. 76(4), pages 763-814, July.
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    5. Federico Ciliberto & Elie Tamer, 2009. "Market Structure and Multiple Equilibria in Airline Markets," Econometrica, Econometric Society, vol. 77(6), pages 1791-1828, November.
    6. Victor Chernozhukov & Han Hong & Elie Tamer, 2007. "Estimation and Confidence Regions for Parameter Sets in Econometric Models," Econometrica, Econometric Society, vol. 75(5), pages 1243-1284, September.
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    More about this item

    JEL classification:

    • L0 - Industrial Organization - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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