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Estimation of finite sequential games

  • Maruyama, Shiko

I propose a new estimation method for finite sequential games that is efficient, computationally attractive, and applicable to a fairly general class of finite sequential games that is beyond the scope of existing studies. The major challenge is the computation of high-dimensional truncated integration whose domain is complicated by strategic interaction. This complication resolves when unobserved off-the-equilibrium-path strategies are controlled for. Separately evaluating the likelihood contribution of each subgame-perfect equilibrium that generates the observed outcome allows the use of the GHK simulator, a widely used importance-sampling probit simulator. Monte Carlo experiments demonstrate the performance and robustness of the proposed method.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 178 (2014)
Issue (Month): 2 ()
Pages: 716-726

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Handle: RePEc:eee:econom:v:178:y:2014:i:2:p:716-726
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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