IDEAS home Printed from https://ideas.repec.org/p/cep/stiecm/618.html
   My bibliography  Save this paper

Equilibrium multiplicity in dynamic games: testing and estimation

Author

Listed:
  • Taisuke Otsu
  • Martin Pesendorfer

Abstract

This paper surveys the recent literature on dynamic games estimation when there is a concern of equilibrium multiplicity. We focus on the questions of testing for equilibrium multiplicity and estimation in the presence of multiplicity.

Suggested Citation

  • 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.
    • Handle: RePEc:cep:stiecm:618
    as

    Download full text from publisher

    File URL: https://sticerd.lse.ac.uk/dps/em/em618.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ariel Pakes & Michael Ostrovsky & Steven Berry, 2007. "Simple estimators for the parameters of discrete dynamic games (with entry/exit examples)," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 373-399, June.
    2. Srisuma, Sorawoot & Linton, Oliver, 2012. "Semiparametric estimation of Markov decision processes with continuous state space," Journal of Econometrics, Elsevier, vol. 166(2), pages 320-341.
    3. Victor Aguirregabiria & Arvind Magesan, 2020. "Identification and Estimation of Dynamic Games When Players’ Beliefs Are Not in Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(2), pages 582-625.
    4. 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.
    5. Victor Aguirregabiria & Allan Collard-Wexler & Stephen P. Ryan, 2021. "Dynamic Games in Empirical Industrial Organization," Papers 2109.01725, arXiv.org, revised Sep 2021.
    6. Victor Chernozhukov & Denis Chetverikov & Mert Demirer & Esther Duflo & Christian Hansen & Whitney Newey & James Robins, 2018. "Double/debiased machine learning for treatment and structural parameters," Econometrics Journal, Royal Economic Society, vol. 21(1), pages 1-68, February.
    7. Vira Semenova, 2018. "Machine Learning for Dynamic Discrete Choice," Papers 1808.02569, arXiv.org, revised Nov 2018.
    8. 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.
    9. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    10. Patrick Bajari & C. Lanier Benkard & Jonathan Levin, 2007. "Estimating Dynamic Models of Imperfect Competition," Econometrica, Econometric Society, vol. 75(5), pages 1331-1370, September.
    11. Federico Ciliberto & Elie Tamer, 2009. "Market Structure and Multiple Equilibria in Airline Markets," Econometrica, Econometric Society, vol. 77(6), pages 1791-1828, November.
    12. Victor Aguirregabiria & Pedro Mira, 2002. "Swapping the Nested Fixed Point Algorithm: A Class of Estimators for Discrete Markov Decision Models," Econometrica, Econometric Society, vol. 70(4), pages 1519-1543, July.
    13. Gabriel Y. Weintraub & C. Lanier Benkard & Benjamin Van Roy, 2008. "Markov Perfect Industry Dynamics With Many Firms," Econometrica, Econometric Society, vol. 76(6), pages 1375-1411, November.
    14. Martin Pesendorfer & Philipp Schmidt-Dengler, 2010. "Sequential Estimation of Dynamic Discrete Games: A Comment," Econometrica, Econometric Society, vol. 78(2), pages 833-842, March.
    15. Ulrich Doraszelski & Mark Satterthwaite, 2010. "Computable Markov‐perfect industry dynamics," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 215-243, June.
    16. Mireia Jofre-Bonet & Martin Pesendorfer, 2003. "Estimation of a Dynamic Auction Game," Econometrica, Econometric Society, vol. 71(5), pages 1443-1489, September.
    17. Ulrich Doraszelski & Kenneth L. Judd, 2012. "Avoiding the curse of dimensionality in dynamic stochastic games," Quantitative Economics, Econometric Society, vol. 3(1), pages 53-93, March.
    18. Jovanovic, Boyan, 1989. "Observable Implications of Models with Multiple Equilibria," Econometrica, Econometric Society, vol. 57(6), pages 1431-1437, November.
    19. Thierry Magnac & David Thesmar, 2002. "Identifying Dynamic Discrete Decision Processes," Econometrica, Econometric Society, vol. 70(2), pages 801-816, March.
    20. V. Joseph Hotz & Robert A. Miller, 1993. "Conditional Choice Probabilities and the Estimation of Dynamic Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 497-529.
    21. Hu, Yingyao & Shum, Matthew, 2012. "Nonparametric identification of dynamic models with unobserved state variables," Journal of Econometrics, Elsevier, vol. 171(1), pages 32-44.
    22. Ifrach, Bar & Weintraub, Gabriel Y., 2016. "A Framework for Dynamic Oligopoly in Concentrated Industries," Research Papers 3449, Stanford University, Graduate School of Business.
    23. Áureo de Paula, 2013. "Econometric Analysis of Games with Multiple Equilibria," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 107-131, May.
    24. Allan Collard‐Wexler, 2013. "Demand Fluctuations in the Ready‐Mix Concrete Industry," Econometrica, Econometric Society, vol. 81(3), pages 1003-1037, May.
    25. Susanne M. Schennach, 2014. "Entropic Latent Variable Integration via Simulation," Econometrica, Econometric Society, vol. 82(1), pages 345-385, January.
    26. Peter Arcidiacono & Patrick Bayer & Jason R. Blevins & Paul B. Ellickson, 2016. "Estimation of Dynamic Discrete Choice Models in Continuous Time with an Application to Retail Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(3), pages 889-931.
    27. 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.
    28. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    29. 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.
    30. Jaap H. Abbring & Jeffrey R. Campbell & Jan Tilly & Nan Yang, 2018. "Very Simple Markov‐Perfect Industry Dynamics: Theory," Econometrica, Econometric Society, vol. 86(2), pages 721-735, March.
    31. Chaim Fershtman & Ariel Pakes, 2012. "Dynamic Games with Asymmetric Information: A Framework for Empirical Work," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(4), pages 1611-1661.
    32. Jaap H. Abbring & Jeffrey R. Campbell, 2010. "Last-In First-Out Oligopoly Dynamics," Econometrica, Econometric Society, vol. 78(5), pages 1491-1527, September.
    33. 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.
    34. Sorawoot Srisuma, 2013. "Minimum distance estimators for dynamic games," Quantitative Economics, Econometric Society, vol. 4(3), pages 549-583, November.
    35. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-599, May.
    36. Frank Kleibergen, 2005. "Testing Parameters in GMM Without Assuming that They Are Identified," Econometrica, Econometric Society, vol. 73(4), pages 1103-1123, July.
    37. Victor Chernozhukov & Han Hong & Elie Tamer, 2007. "Estimation and Confidence Regions for Parameter Sets in Econometric Models," Econometrica, Econometric Society, vol. 75(5), pages 1243-1284, September.
    38. 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, pages 623-634, May.
    39. Jaap H. Abbring & Jeffrey R. Campbell & Jan Tilly & Nan Yang, 2018. "Very Simple Markov-Perfect Industry Dynamics: Empirics," Working Paper Series WP-2018-17, Federal Reserve Bank of Chicago.
    40. Victor Aguirregabiria & Pedro Mira, 2007. "Sequential Estimation of Dynamic Discrete Games," Econometrica, Econometric Society, vol. 75(1), pages 1-53, January.
    41. Nathan H. Miller & Gloria Sheu & Matthew C. Weinberg, 2021. "Oligopolistic Price Leadership and Mergers: The United States Beer Industry," American Economic Review, American Economic Association, vol. 111(10), pages 3123-3159, October.
    42. Federico A Bugni & Jackson Bunting, 2021. "On the Iterated Estimation of Dynamic Discrete Choice Games [Pseudo maximum likelihood estimation of structural models involving fixed-point problems]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(3), pages 1031-1073.
    43. Peter Arcidiacono & Robert A. Miller, 2011. "Conditional Choice Probability Estimation of Dynamic Discrete Choice Models With Unobserved Heterogeneity," Econometrica, Econometric Society, vol. 79(6), pages 1823-1867, November.
    44. Abbring, Jaap & Campbell, J.R. & Tilly, J. & Yang, N., 2018. "Very Simple Markov-Perfect Industry Dynamics (revision of 2017-021) : Empirics," Other publications TiSEM 3a12f099-900b-44ac-b692-a, Tilburg University, School of Economics and Management.
    45. Martin Pesendorfer & Philipp Schmidt-Dengler, 2008. "Asymptotic Least Squares Estimators for Dynamic Games -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 901-928.
    46. John Asker & Chaim Fershtman & Jihye Jeon & Ariel Pakes, 2020. "A computational framework for analyzing dynamic auctions: The market impact of information sharing," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 805-839, September.
    47. Maskin, Eric & Tirole, Jean, 2001. "Markov Perfect Equilibrium: I. Observable Actions," Journal of Economic Theory, Elsevier, vol. 100(2), pages 191-219, October.
    48. Elie Tamer, 2003. "Incomplete Simultaneous Discrete Response Model with Multiple Equilibria," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(1), pages 147-165.
    49. Bresnahan, Timothy F. & Reiss, Peter C., 1991. "Empirical models of discrete games," Journal of Econometrics, Elsevier, vol. 48(1-2), pages 57-81.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. 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.
    3. Steven T Berry & Giovanni Compiani, 2023. "An Instrumental Variable Approach to Dynamic Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(4), pages 1724-1758.
    4. Victor Aguirregabiria & Victor Aguirregabiria & Aviv Nevo & Aviv Nevo, 2010. "Recent Developments in Empirical IO: Dynamic Demand and Dynamic Games," Working Papers tecipa-419, University of Toronto, Department of Economics.
    5. 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.
    6. Yoon, Jangsu, 2024. "Identification and estimation of sequential games of incomplete information with multiple equilibria," Journal of Econometrics, Elsevier, vol. 238(2).
    7. Pesendorfer, Martin & Takahashi, Yuya & Otsu, Taisuke, 2014. "Testing Equilibrium Multiplicity in Dynamic Games," CEPR Discussion Papers 10111, C.E.P.R. Discussion Papers.
    8. Taisuke Otsu & Martin Pesendorfer & Yuya Sasaki & Yuya Takahashi, 2022. "Estimation Of (Static Or Dynamic) Games Under Equilibrium Multiplicity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(3), pages 1165-1188, August.
    9. Victor Aguirregabiria & Allan Collard-Wexler & Stephen P. Ryan, 2021. "Dynamic Games in Empirical Industrial Organization," NBER Working Papers 29291, National Bureau of Economic Research, Inc.
    10. A. Ronald Gallant & Han Hong & Ahmed Khwaja, 2018. "The Dynamic Spillovers of Entry: An Application to the Generic Drug Industry," Management Science, INFORMS, vol. 64(3), pages 1189-1211, March.
    11. 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.
    12. Otsu, Taisuke & Pesendorfer, Martin & Takahashi, Yuya, 2013. "Testing for Equilibrium Multiplicity in Dynamic Markov Games," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 423, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    13. Komarova, Tatiana & Sanches, Fábio Adriano & Silva Junior, Daniel & Srisuma, Sorawoot, 2018. "Joint analysis of the discount factor and payoff parameters in dynamic discrete choice games," LSE Research Online Documents on Economics 86858, London School of Economics and Political Science, LSE Library.
    14. Sasaki, Yuya & Takahashi, Yuya & Xin, Yi & Hu, Yingyao, 2023. "Dynamic discrete choice models with incomplete data: Sharp identification," Journal of Econometrics, Elsevier, vol. 236(1).
    15. Ruli Xiao, 2016. "Nonparametric Identification of Dynamic Games with Multiple Equilibria and Unobserved Heterogeneity," CAEPR Working Papers 2016-002, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    16. Jason R. Blevins & Ahmed Khwaja & Nathan Yang, 2018. "Firm Expansion, Size Spillovers, and Market Dominance in Retail Chain Dynamics," Management Science, INFORMS, vol. 64(9), pages 4070-4093.
    17. 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.
    18. Blevins, Jason R. & Kim, Minhae, 2024. "Nested Pseudo likelihood estimation of continuous-time dynamic discrete games," Journal of Econometrics, Elsevier, vol. 238(2).
    19. Paul B. Ellickson & Sanjog Misra, 2011. "Structural Workshop Paper --Estimating Discrete Games," Marketing Science, INFORMS, vol. 30(6), pages 997-1010, November.
    20. Abbring, Jaap & Campbell, J.R. & Tilly, J. & Yang, N., 2018. "Very Simple Markov-Perfect Industry Dynamics (revision of 2017-021) : Empirics," Discussion Paper 2018-040, Tilburg University, Center for Economic Research.

    More about this item

    Keywords

    Dynamic Markov game; Multiplicity of equilibria;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cep:stiecm:618. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://sticerd.lse.ac.uk/_new/publications/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.