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Random Coefficients in Static Games of Complete Information

  • Fabian Dunker

    ()

    (University of Goettingen)

  • Stefan Hoderlein

    (Boston College)

  • Hiroaki Kaido

    ()

    (Brown University)

Individual players in a simultaneous equation binary choice model act differently in different environments in ways that are frequently not captured by observables and a simple additive random error. This paper proposes a random coefficient specification to capture this type of heterogeneity in behavior, and discusses nonparametric identification and estimation of the distribution of random coefficients. We establish nonparametric point identification of the joint distribution of all random coefficients, except those on the interaction effects, provided the players behave competitively in all markets. Moreover, we establish set identification of the density of the coefficients on the interaction effects, and provide additional conditions that allow to point identify this density. Since our identification strategy is constructive throughout, it allows to construct sample counterpart estimators. We analyze their asymptotic behavior, and illustrate their finite sample behavior in a numerical study. Finally, we discuss several extensions, like the semiparametric case, or correlated random coefficients.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 835.

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Date of creation: 25 Mar 2013
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Handle: RePEc:boc:bocoec:835
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