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Pooling data across markets in dynamic Markov games

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  • Otsu, Taisuke
  • Pesendorfer, Martin
  • Takahashi, Yuya

Abstract

This paper proposes several statistical tests for finite state Markov games to examine whether data from distinct markets can be pooled. We formulate homogeneity 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. The null hypotheses of these homogeneity tests are necessary conditions (or maintained assumptions) for poolability of the data. Thus rejections of these null imply that the data cannot be pooled across markets. Acceptances of these null are considered as supporting evidences for the maintained assumptions of estimation using pooled data. In a Monte Carlo study we find that the test based on the steady-state distribution performs well and has high powereven 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 data across markets can be pooled.

Suggested Citation

  • Otsu, Taisuke & Pesendorfer, Martin & Takahashi, Yuya, 2016. "Pooling data across markets in dynamic Markov games," LSE Research Online Documents on Economics 66182, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:66182
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    File URL: http://eprints.lse.ac.uk/66182/
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    References listed on IDEAS

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    Cited by:

    1. Ruli Xiao, 2016. "Nonparametric Identification of Dynamic Games with Multiple Equilibria and Unobserved Heterogeneity," Caepr Working Papers 2016-002 Classification-C, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    2. repec:eee:econom:v:203:y:2018:i:2:p:328-343 is not listed on IDEAS

    More about this item

    Keywords

    dynamic Markov game; poolability; multiplicity of equilibria; hypothesis testing;

    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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