Nonparametric Sharp Bounds For Payoffs In 2 Ã— 2 Games
We derive the empirical content of Nash equilibrium in 2Ã—2 games of perfect information, including duopoly entry and coordination games. The derived bounds are nonparametric intersection bounds and are simple enough to lend themselves to existing inference methods. Implications of pure strategy Nash equilibrium and of exclusion restrictions are also derived. Without further assumptions, the hypothesis of Nash equilibrium play is not falsifiable. However, nontrivial bounds hold for the extent of potential monopoly advantage or free riding incentives.
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