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Estimating dynamic discrete‐choice games of incomplete information

Author

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  • Michael Egesdal
  • Zhenyu Lai
  • Che‐Lin Su

Abstract

We investigate the estimation of models of dynamic discrete‐choice games of incomplete information, formulating the maximum‐likelihood estimation exercise as a constrained optimization problem that can be solved using state‐of‐the‐art constrained optimization solvers. Under the assumption that only one equilibrium is played in the data, our approach avoids repeatedly solving the dynamic game or finding all equilibria for each candidate vector of the structural parameters. We conduct Monte Carlo experiments to investigate the numerical performance and finite‐sample properties of the constrained optimization approach for computing the maximum‐likelihood estimator, the two‐step pseudo‐maximum‐likelihood estimator, and the nested pseudo‐likelihood estimator, implemented by both the nested pseudo‐likelihood algorithm and a modified nested pseudo‐likelihood algorithm.

Suggested Citation

  • Michael Egesdal & Zhenyu Lai & Che‐Lin Su, 2015. "Estimating dynamic discrete‐choice games of incomplete information," Quantitative Economics, Econometric Society, vol. 6(3), pages 567-597, November.
    • Handle: RePEc:wly:quante:v:6:y:2015:i:3:p:567-597
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    Cited by:

    1. Victor Aguirregabiria & Mathieu Marcoux, 2021. "Imposing equilibrium restrictions in the estimation of dynamic discrete games," Quantitative Economics, Econometric Society, vol. 12(4), pages 1223-1271, November.
    2. Adam Dearing & Jason R. Blevins, 2019. "Efficient and Convergent Sequential Pseudo-Likelihood Estimation of Dynamic Discrete Games," Papers 1912.10488, arXiv.org, revised Apr 2024.
    3. repec:hal:wpspec:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    4. Marleen Marra, 2024. "Estimating and Auction Platform Game with Two-Sided Entry," Working Papers hal-03393068, HAL.
    5. Michael W. Walrath, 2016. "Entry Models Applied to Churches: Could Protestants use a Catholic Bishop to Solve Excess Entry?," Journal of Industrial Economics, Wiley Blackwell, vol. 64(3), pages 557-588, September.
    6. Taisuke Otsu & Martin Pesendorfer, 2021. "Equilibrium multiplicity in dynamic games: testing and estimation," STICERD - Econometrics Paper Series 618, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    7. Blevins, Jason R. & Kim, Minhae, 2024. "Nested Pseudo likelihood estimation of continuous-time dynamic discrete games," Journal of Econometrics, Elsevier, vol. 238(2).
    8. Taisuke Otsu & Martin Pesendorfer, 2023. "Equilibrium multiplicity in dynamic games: Testing and estimation," The Econometrics Journal, Royal Economic Society, vol. 26(1), pages 26-42.
    9. Keppo, Jussi & Satopää, Ville A., 2024. "Bayesian herd detection for dynamic data," International Journal of Forecasting, Elsevier, vol. 40(1), pages 285-301.
    10. Chenyu Yang, 2020. "Vertical structure and innovation: A study of the SoC and smartphone industries," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 739-785, September.
    11. repec:spo:wpecon:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    12. repec:spo:wpmain:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    13. Luo, Yao & Xiao, Ping & Xiao, Ruli, 2022. "Identification of dynamic games with unobserved heterogeneity and multiple equilibria," Journal of Econometrics, Elsevier, vol. 226(2), pages 343-367.
    14. repec:hal:spmain:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS

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