Estimating Parameters of Structural Models Using Neural Networks
Accepted at Marketing Science
49 Pages Posted: 9 Dec 2019 Last revised: 16 May 2024
Date Written: July 23, 2024
Abstract
We study an alternative use of machine learning. We train neural nets to provide the parameter estimate of a given (structural) econometric model, e.g., discrete choice, consumer search. Training examples consist of datasets generated by the econometric model under a range of parameter values. The neural net takes the moments of a dataset as input and tries to recognize the parameter value underlying that dataset. Besides the point estimate, the neural net can also output statistical accuracy. This neural net estimator (NNE) tends to limited-information Bayesian posterior as the number of training datasets increases. We apply NNE to a consumer search model. It gives more accurate estimates at lighter computational costs than the prevailing approach. NNE is also robust to redundant moment inputs. In general, NNE offers the most benefits in applications where other estimation approaches require very heavy simulation costs. We provide code at: https://nnehome.github.io.
Keywords: neural networks, machine learning, structural estimation, simulation costs, redundant moments, sequential search
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