Estimating Parameters of Structural Models Using Neural Networks

Accepted at Marketing Science

USC Marshall School of Business Research Paper

49 Pages Posted: 9 Dec 2019 Last revised: 16 May 2024

See all articles by Yanhao 'Max' Wei

Yanhao 'Max' Wei

University of Southern California - Marshall School of Business

Zhenling Jiang

University of Pennsylvania - The Wharton School

Date Written: May 1, 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

Suggested Citation

Wei, Yanhao and Jiang, Zhenling, Estimating Parameters of Structural Models Using Neural Networks (May 1, 2024). Accepted at Marketing Science, USC Marshall School of Business Research Paper, Available at SSRN: https://ssrn.com/abstract=3496098 or http://dx.doi.org/10.2139/ssrn.3496098

Yanhao Wei (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

Zhenling Jiang

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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