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Nonparametric analysis of monotone choice

Author

Listed:
  • Natalia Lazzati
  • John K.-H. Quah
  • Koji Shirai

    (School of Economics, Kwansei Gakuin University)

Abstract

We develop a nonparametric approach to test for monotone behavior in optimizing agents and to make out-of-sample predictions. Our approach could be applied to simultaneous games with ordered actions, with agents playing pure strategy Nash equilibria or Bayesian Nash equilibria. We require no parametric assumptions on payoff functions nor distributional assumptions on the unobserved heterogeneity of agents. Multiplicity of optimal solutions (or equilibria) is not excluded, and we are agnostic about how they are selected. To illustrate how our approach works, we include an empirical application to an IO entry game.

Suggested Citation

  • Natalia Lazzati & John K.-H. Quah & Koji Shirai, 2018. "Nonparametric analysis of monotone choice," Discussion Paper Series 184, School of Economics, Kwansei Gakuin University.
    • Handle: RePEc:kgu:wpaper:184
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    References listed on IDEAS

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    Cited by:

    1. Rahul Deb & Yuichi Kitamura & John K H Quah & Jörg Stoye, 2023. "Revealed Price Preference: Theory and Empirical Analysis," Review of Economic Studies, Oxford University Press, vol. 90(2), pages 707-743.
    2. Koch, Caleb M., 2019. "Index-wise comparative statics," Mathematical Social Sciences, Elsevier, vol. 102(C), pages 35-41.

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    More about this item

    Keywords

    revealed preference; monotone comparative statics; single crossing differences; supermodular games; entry games;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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