Statistical Backwards Induction: A Simple Method for Estimating Recursive Strategic Models

20 Pages Posted: 18 Aug 2009 Last revised: 30 Dec 2010

See all articles by Muhammet Ali Bas

Muhammet Ali Bas

affiliation not provided to SSRN

Curtis S. Signorino

University of Rochester - Department of Political Science

Robert W. Walker

Willamette University - Atkinson Graduate School of Management

Abstract

We present a simple method for estimating regressions based on recursive extensive-form games. Our procedure, which can be implemented in most standard statistical packages, involves sequentially estimating standard logits (or probits) in a manner analogous to backwards induction. We demonstrate that the technique produces consistent parameter estimates and show how to calculate consistent standard errors. To illustrate the method, we replicate Leblang’s (2003) study of speculative attacks by financial markets and government responses to these attacks.

Keywords: econometrics, statistics, games, discrete choice, strategic

Suggested Citation

Bas, Muhammet Ali and Signorino, Curtis S. and Walker, Robert W., Statistical Backwards Induction: A Simple Method for Estimating Recursive Strategic Models. Political Analysis, Vol. 16, Issue 1, pp. 21-40, 2008, Available at SSRN: https://ssrn.com/abstract=1448422 or http://dx.doi.org/10.1093/pan/mpm029

Muhammet Ali Bas (Contact Author)

affiliation not provided to SSRN ( email )

No Address Available

Curtis S. Signorino

University of Rochester - Department of Political Science ( email )

Rochester, NY 14627
United States

Robert W. Walker

Willamette University - Atkinson Graduate School of Management

900 State Street
Salem, OR 97301
United States

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