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Inference of Signs of Interaction Effects in Simultaneous Games with Incomplete Information, Second Version


  • Aureo de Paula

    () (Department of Economics, University of Pennsylvania)

  • Xun Tang

    () (Department of Economics, University of Pennsylvania)


This paper studies the inference of interaction effects, i.e., the impacts of players' actions on each other's payoffs, in discrete simultaneous games with incomplete information. We propose an easily implementable test for the signs of state-dependent interaction effects that does not require parametric specifications of players' payoffs, the distributions of their private signals or the equilibrium selection mechanism. The test relies on the commonly invoked assumption that players' private signals are independent conditional on observed states. The procedure is valid in the presence of multiple equilibria, and, as a by-product of our approach, we propose a formal test for multiple equilibria in the data-generating process. We provide Monte Carlo evidence of the test's good performance infinite samples. We also implement the test to infer the direction of interaction effects in couples' joint retirement decisions using data from the Health and Retirement Study.

Suggested Citation

  • Aureo de Paula & Xun Tang, 2010. "Inference of Signs of Interaction Effects in Simultaneous Games with Incomplete Information, Second Version," PIER Working Paper Archive 10-021, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 30 Jun 2010.
  • Handle: RePEc:pen:papers:10-021

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    References listed on IDEAS

    1. Aradillas-Lopez, Andres, 2010. "Semiparametric estimation of a simultaneous game with incomplete information," Journal of Econometrics, Elsevier, vol. 157(2), pages 409-431, August.
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    Cited by:

    1. Nianqing Liu & Haiqing Xu, "undated". "Semiparametric Analysis of Binary Games of Incomplete Information," Department of Economics Working Papers 130911, The University of Texas at Austin, Department of Economics, revised Nov 2012.
    2. Michèle Belot & Marco Francesconi, 2013. "Dating Preferences and Meeting Opportunities in Mate Choice Decisions," Journal of Human Resources, University of Wisconsin Press, vol. 48(2), pages 474-508.
    3. Taisuke Otsu & Martin Pesendorfer & Yuya Takahashi, 2016. "Pooling data across markets in dynamic Markov games," Quantitative Economics, Econometric Society, vol. 7(2), pages 523-559, July.
    4. Otsu, Taisuke & Pesendorfer, Martin & Takahashi, Yuya, 2014. "Testing Equilibrium Multiplicity in Dynamic Games," CEPR Discussion Papers 10111, C.E.P.R. Discussion Papers.

    More about this item


    identification; inference; multiple equilibria; incomplete information games;

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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