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Testing Models with Multiple Equilibria by Quantile Methods


  • Ivana Komunjer
  • Federico Echenique


In this paper, we present methods for deriving testable implication from models with multiple equilibria. Our framework includes many economic models with a one-dimensional endogenous variable---examples are macroeconomic growth models (Solow, 1956), partial equilibrium models, and games of strategic complementarities. Unlike traditionally assumed in the literature, the multiple equilibria models considered here have no implications for the conditional mean of the endogenous variable. We show that such models typically have strong implications for the tail of the conditional distribution of the endogenous variable. We present an econometric framework for testing these implications which reposes on quantile methods and extreme-value theory. We construct a novel order-restricted test based on conditional quantiles of the endogenous variable rather than its mean, which distinguishes our approach from commonly used tests similar to that of Bartholomew (1959)

Suggested Citation

  • Ivana Komunjer & Federico Echenique, 2004. "Testing Models with Multiple Equilibria by Quantile Methods," Econometric Society 2004 North American Summer Meetings 447, Econometric Society.
  • Handle: RePEc:ecm:nasm04:447

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    References listed on IDEAS

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    Cited by:

    1. Schmidt, Lawrence & Timmermann, Allan G & Wermers, Russ, 2014. "Runs on Money Market Funds," CEPR Discussion Papers 9906, C.E.P.R. Discussion Papers.
    2. Amir, Rabah & Lazzati, Natalia, 2011. "Network effects, market structure and industry performance," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2389-2419.
    3. Rai, Yoshiyasu & Otsu, Taisuke, 2013. "On testability of complementarity in models with multiple equilibria," Economics Letters, Elsevier, vol. 120(1), pages 79-82.
    4. Vincent P. Crawford & Miguel A. Costa-Gomes & Nagore Iriberri, 2010. "Strategic Thinking," Levine's Working Paper Archive 661465000000001148, David K. Levine.
    5. Cespa, Giovanni & Vives, Xavier, 2011. "Expectations, Liquidity, and Short-term Trading," CEPR Discussion Papers 8303, C.E.P.R. Discussion Papers.
    6. Natalia Lazzati & John K.-H. Quah & Koji Shirai, 2015. "A revealed preference theory of monotone choice and strategic complementarity," Discussion Paper Series 138, School of Economics, Kwansei Gakuin University, revised Dec 2015.
    7. Alberto Bisin & Andrea Moro & Giorgio Topa, 2011. "The empirical content of models with multiple equilibria in economies with social interactions," Staff Reports 504, Federal Reserve Bank of New York.
    8. Giovanni Cespa & Xavier Vives, 2015. "The Beauty Contest and Short-Term Trading," Journal of Finance, American Finance Association, vol. 70(5), pages 2099-2154, October.
    9. Komunjer, Ivana, 2007. "Global Identification In Nonlinear Semiparametric Models," University of California at San Diego, Economics Working Paper Series qt8dk0n386, Department of Economics, UC San Diego.
    10. repec:bos:wpaper:wp2013-001 is not listed on IDEAS
    11. Ron Borkovsky & Paul Ellickson & Brett Gordon & Victor Aguirregabiria & Pedro Gardete & Paul Grieco & Todd Gureckis & Teck-Hua Ho & Laurent Mathevet & Andrew Sweeting, 2015. "Multiplicity of equilibria and information structures in empirical games: challenges and prospects," Marketing Letters, Springer, vol. 26(2), pages 115-125, June.
    12. Miyauchi, Yuhei, 2016. "Structural estimation of pairwise stable networks with nonnegative externality," Journal of Econometrics, Elsevier, vol. 195(2), pages 224-235.
    13. Lawrence Schmidt & Allan Timmermann & Russ Wermers, 2016. "Runs on Money Market Mutual Funds," American Economic Review, American Economic Association, vol. 106(9), pages 2625-2657, September.
    14. Braz Camargo, 2011. "Career Concerns: A Human Capital Perspective," 2011 Meeting Papers 1274, Society for Economic Dynamics.
    15. Áureo de Paula, 2013. "Econometric Analysis of Games with Multiple Equilibria," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 107-131, May.

    More about this item


    multiple equilibria; quantile regression; extreme-value theory; order-restricted inference;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other


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