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Pooling data across markets in dynamic Markov games

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  • Taisuke Otsu
  • Martin Pesendorfer
  • Yuya Takahashi

Abstract

This paper proposes several statistical tests for finite state Markov games to examine the null hypothesis that data from distinct markets can be pooled. We formulate tests of (i) the conditional choice and state transition probabilities, (ii) the steady-state distribution, and (iii) the conditional state distribution given an initial state. If the null cannot be rejected, then the data across markets can be pooled. A rejection of the null implies that the data cannot be pooled across markets. In a Monte Carlo study we find that the test based on the steady-state distribution performs well and has high power even with small numbers of markets and time periods. We apply the tests to the empirical study of Ryan (2012) that analyzes dynamics of the U.S. Portland Cement industry and assess if the single equilibrium assumption is supported by the data.

Suggested Citation

  • Taisuke Otsu & Martin Pesendorfer & Yuya Takahashi, 2015. "Pooling data across markets in dynamic Markov games," STICERD - Econometrics Paper Series /2015/582, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  • Handle: RePEc:cep:stiecm:/2015/582
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    Cited by:

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    2. Victor Aguirregabiria, 2020. "Identification of Firms' Beliefs in Structural Models of Market Competition," Working Papers tecipa-670, University of Toronto, Department of Economics.
    3. Xiao, Ruli, 2018. "Identification and estimation of incomplete information games with multiple equilibria," Journal of Econometrics, Elsevier, vol. 203(2), pages 328-343.
    4. Yingyao Hu & Yi Xin, 2019. "Identi?cation and estimation of dynamic structural models with unobserved choices," CeMMAP working papers CWP35/19, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    5. Zhang, Yishuo & Li, Gang & Muskat, Birgit & Law, Rob & Yang, Yating, 2020. "Group pooling for deep tourism demand forecasting," Annals of Tourism Research, Elsevier, vol. 82(C).
    6. Ruli Xiao, 2016. "Nonparametric Identification of Dynamic Games with Multiple Equilibria and Unobserved Heterogeneity," CAEPR Working Papers 2016-002, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    7. Otsu, Taisuke & Pesendorfer, Martin & Sasaki, Yuya & Takahashi, Yuya, 2020. "Estimation of (static or dynamic) games under equilibrium multiplicity," CEPR Discussion Papers 14342, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Dynamic Markov game; Poolability; Multiplicity of equilibria; Hypothesis testing;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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