Comment: The Identification Power of Equilibrium in Simple Games

Aguirregabiria, Victor (2008): Comment: The Identification Power of Equilibrium in Simple Games. Published in: Journal of Business and Economic Statistics , Vol. 26, No. 3 (1 July 2008): pp. 283-289.

Abstract

This paper studies the identification of structural parameters in dynamic games when we replace the assumption of Markov Perfect Equilibrium (MPE) with weaker conditions such as rational behavior and rationalizability. The identification of players' time discount factors is of especial interest. I present identification results for a simple two-periods/two-players dynamic game of market entry-exit. Under the assumption of level-2 rationality (i.e., players are rational and they know that they are rational), a exclusion restriction and a large-support condition on one of the exogenous explanatory variables are sufficient for point-identification of all the structural parameters.

• Item Type: MPRA Paper
• Language: English
• Keywords: Identification, Empirical dynamic discrete games, Rational behavior, Rationalizability.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General; C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics

References

Aradillas-Lopez, A. and E. Tamer (2008): "The Identification Power of Equilibrium in Games," Journal of Business and Economic Statistics, forthcoming.

Aumann, R. and A. Brandenburger (1995): "Epistemic Conditions for Nash Equilibrium," Econometrica, 63, 1161-1180.

Fudenberg, D. and J. Tirole (1991): "Game Theory". The MIT Press. Cambridge, Massachusetts.

Haile, P. and E. Tamer (2003): "Inference with an Incomplete Model of English Auctions," Journal of Political Economy, 111, 1--51.

Tamer, E. (2003): "Incomplete Simultaneous Discrete Response Model with Multiple Equilibria," Review of Economic Studies, 70, 147-167.