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Estimation of finite sequential games

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  • Maruyama, Shiko

Abstract

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.

Suggested Citation

  • Maruyama, Shiko, 2014. "Estimation of finite sequential games," Journal of Econometrics, Elsevier, vol. 178(2), pages 716-726.
  • Handle: RePEc:eee:econom:v:178:y:2014:i:2:p:716-726
    DOI: 10.1016/j.jeconom.2013.10.011
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    Cited by:

    1. Meliyanni Johar & Shiko Maruyama, 2012. "Externality and Strategic Interaction in the Location Choice of Siblings under Altruism toward Parents," Working Papers 201201, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.
    2. Shiko Maruyama & Meliyanni Johar, 2017. "Do siblings free‐ride in “being there” for parents?," Quantitative Economics, Econometric Society, vol. 8(1), pages 277-316, March.

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    More about this item

    Keywords

    Inference in discrete games; Sequential games; Monte Carlo integration; GHK simulator; Subgame perfection;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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