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Identification and Estimation of Large Network Games with Private Link Information

Author

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  • Hulya Eraslan

    () (Rice University, Department of Economics)

  • Xun Tang

    () (Rice University, Department of Economics)

Abstract

We study the identification and estimation of large network games where each individual holds private information about its links and payoffs. Extending Galeotti, Goyal, Jackson, Vega-Redondo and Yariv (2010), we build a tractable empirical model of network games where the individuals are heterogeneous with private link and payoff information, and characterize its unique, symmetric pure-strategy Bayesian Nash equilibrium. We then show that the parameters in individual payoffs are identified under "large market" asymptotics, whereby the number of individuals increases to infinity in a fixed and small number of networks. We also propose a consistent two-step m-estimator for individual payoffs. Our method is distribution-free in that it does not require parametrization of the distribution of shocks in individual payoffs. Monte Carlo simulation show that our estimator has good performance in moderate-sized samples.

Suggested Citation

  • Hulya Eraslan & Xun Tang, 2018. "Identification and Estimation of Large Network Games with Private Link Information," Koç University-TUSIAD Economic Research Forum Working Papers 1809, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:1809
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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1809.pdf
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    References listed on IDEAS

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    1. Áureo de Paula & Seth Richards-Shubik & Elie Tamer, 2015. "Identification of preferences in network formation games," CeMMAP working papers CWP29/15, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    2. Anton Badev, 2014. "Discrete Games in Endogenous Networks: Theory and Policy," 2014 Meeting Papers 901, Society for Economic Dynamics.
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