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Semiparametric Estimation of a Dynamic Game of Incomplete Information

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  • Patrick Bajari
  • Han Hong

Abstract

Recently, empirical industrial organization economists have proposed estimators for dynamic games of incomplete information. In these models, agents choose from a finite number actions and maximize expected discounted utility in a Markov perfect equilibrium. Previous econometric methods estimate the probability distribution of agents' actions in a first stage. In a second step, a finite vector of parameters of the period return function are estimated. In this paper, we develop semiparametric estimators for dynamic games allowing for continuous state variables and a nonparametric first stage. The estimates of the structural parameters are T1/2 consistent (where T is the sample size) and asymptotically normal even though the first stage is estimated nonparametrically. We also propose sufficient conditions for identification of the model.

Suggested Citation

  • Patrick Bajari & Han Hong, 2006. "Semiparametric Estimation of a Dynamic Game of Incomplete Information," NBER Technical Working Papers 0320, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberte:0320
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    References listed on IDEAS

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    1. Patrick Bajari & C. Lanier Benkard & Jonathan Levin, 2007. "Estimating Dynamic Models of Imperfect Competition," Econometrica, Econometric Society, vol. 75(5), pages 1331-1370, September.
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    11. Davis, Peter, 2006. "Estimation of quantity games in the presence of indivisibilities and heterogeneous firms," Journal of Econometrics, Elsevier, vol. 134(1), pages 187-214, September.
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    Cited by:

    1. Victor Aguirregabiria, 2006. "Another Look at the Identification of Dynamic Discrete Decision Processes: With an Application to Retirement Behavior," 2006 Meeting Papers 169, Society for Economic Dynamics.
    2. Aguirregabiria, Victor & Mira, Pedro, 2010. "Dynamic discrete choice structural models: A survey," Journal of Econometrics, Elsevier, vol. 156(1), pages 38-67, May.
    3. Hiroyuki Kasahara & Katsumi Shimotsu, 2012. "Sequential Estimation of Structural Models With a Fixed Point Constraint," Econometrica, Econometric Society, vol. 80(5), pages 2303-2319, September.
    4. Daniel Ackerberg & Xiaohong Chen & Jinyong Hahn, 2012. "A Practical Asymptotic Variance Estimator for Two-Step Semiparametric Estimators," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 481-498, May.
    5. Carlos Daniel Santos, 2009. "Recovering the Sunk Costs of R&D: the Moulds Industry Case," CEP Discussion Papers dp0958, Centre for Economic Performance, LSE.
    6. Hiroyuki Kasahara & Katsumi Shimotsu, 2006. "Nonparametric Identification And Estimation Of Finite Mixture Models Of Dynamic Discrete Choices," Working Paper 1092, Economics Department, Queen's University.
    7. Fabio A. Miessi Sanches & Daniel Junior Silva & Sorawoot Srisuma, 2016. "Ordinary Least Squares Estimation Of A Dynamic Game Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(2), pages 623-634, May.
    8. George-Levi Gayle & Limor Golan, "undated". "Estimating a Dynamic Adverse Selection Model: Labor Force Experience and the Changing Gender Earnings Gap 1968-93," GSIA Working Papers 2006-E40, Carnegie Mellon University, Tepper School of Business.
    9. Patrick Bajari & C. Lanier Benkard & Jonathan Levin, 2007. "Estimating Dynamic Models of Imperfect Competition," Econometrica, Econometric Society, vol. 75(5), pages 1331-1370, September.
    10. Daniel Ackerberg & Xiaohong Chen & Jinyong Hahn, 2011. "Asymptotic Variance Estimator for Two-Step Semiparametric Estimators," Cowles Foundation Discussion Papers 1803, Cowles Foundation for Research in Economics, Yale University.
    11. Lin, C.-Y. Cynthia & Yi, Fujin, 2012. "Ethanol Plant Investment in Canada: A Structural Model," Institute of Transportation Studies, Working Paper Series qt7vd043zr, Institute of Transportation Studies, UC Davis.
    12. Norman Offstein, 2007. "An extortionary guerrilla movement," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(6), pages 995-1011.
    13. Lawell, Cynthia Lin & Yi, Fujin & Thome, Karen E, 2017. "The Effects of Subsidies and Mandates: A Dynamic Model of the Ethanol Industry," Institute of Transportation Studies, Working Paper Series qt73n0t4pv, Institute of Transportation Studies, UC Davis.
    14. Song Yao & Carl F. Mela, 2008. "A Dynamic Model of Sponsored Search Advertising," Working Papers 08-16, NET Institute, revised Sep 2008.
    15. Fabio A. Miessi Sanches & Daniel Silva Junior, Sorawoot Srisuma, 2014. "Ordinary Least Squares Estimation for a Dynamic Game," Working Papers, Department of Economics 2014_19, University of São Paulo (FEA-USP), revised 23 Feb 2015.
    16. Xiao, Mo & Orazem, Peter, 2006. "Do Entry Conditions Vary over Time? Entry and Competition in the Broadband Market: 1999-2003," Staff General Research Papers Archive 12500, Iowa State University, Department of Economics.
    17. Bart Bronnenberg & Jean Dubé & Carl Mela & Paulo Albuquerque & Tulin Erdem & Brett Gordon & Dominique Hanssens & Guenter Hitsch & Han Hong & Baohong Sun, 2008. "Measuring long-run marketing effects and their implications for long-run marketing decisions," Marketing Letters, Springer, vol. 19(3), pages 367-382, December.
    18. Kasahara, Hiroyuki & Shimotsu, Katsumi, 2008. "Pseudo-likelihood estimation and bootstrap inference for structural discrete Markov decision models," Journal of Econometrics, Elsevier, vol. 146(1), pages 92-106, September.

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    More about this item

    JEL classification:

    • L0 - Industrial Organization - - General
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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