Confidence Regions for Parameters in Discrete Games with Multiple Equilibria, with an Application to Discount Chain Store Location

58 Pages Posted: 10 Jul 2019

See all articles by Donald W. K. Andrews

Donald W. K. Andrews

Yale University - Cowles Foundation

Steven Berry

Yale University - Department of Economics; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Panle Jia Barwick

Cornell University - Department of Economics

Date Written: May 1, 2004

Abstract

In this paper, we consider the empirical problem of estimating the underlying profit function of firms from “revealed choice” data on entry in a cross-section of oligopoly markets. One problem faced in the earlier literature is the problem of multiple equilibrium, which makes traditional maximum likelihood estimation (MLE) techniques difficult to implement. The problem of multiple equilibria is serious enough that Sutton (2000), for example, suggests giving up on parameter estimation in the case of realistic entry models. However, Manski and co-authors (e.g. Manski and Tamer (2002)) encourage work on a related class of “incomplete” parametric models. In this paper, we combine the two ideas and consider the estimation of complicated entry models that exhibit multiple equilibria, without attempting to resolve the equilibrium selection problem.

Suggested Citation

Andrews, Donald W. K. and Berry, Steven T. and Barwick, Panle Jia, Confidence Regions for Parameters in Discrete Games with Multiple Equilibria, with an Application to Discount Chain Store Location (May 1, 2004). Available at SSRN: https://ssrn.com/abstract=3417207 or http://dx.doi.org/10.2139/ssrn.3417207

Donald W. K. Andrews

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Steven T. Berry

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8264
United States
203-432-3556 (Phone)
203-432-6323 (Fax)

National Bureau of Economic Research (NBER)

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Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Panle Jia Barwick (Contact Author)

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

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