Estimation of (Static or Dynamic) Games Under Equilibrium Multiplicity

30 Pages Posted: 29 Jan 2020

See all articles by Martin Pesendorfer

Martin Pesendorfer

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR)

Taisuke Otsu

Yale University - Cowles Foundation

Yuya Sasaki

Vanderbilt University - College of Arts and Science - Department of Economics

Yuya Takahashi

University of Washington

Date Written: January 2020

Abstract

We propose a multiplicity-robust estimation method for (static or dynamic) games. The method allows for distinct behaviors and strategies across markets by treating market specific behaviors as correlated latent variables, with their conditional probability measure treated as an infinite-dimensional nuisance parameter. Instead of solving the intermediate problem which requires optimization over the infinite dimensional set, we consider the equivalent dual problem which entails optimization over only a finite-dimensional Euclidean space. This property allows for a practically feasible characterization of the identified region for the structural parameters. We apply the estimation method to newspaper market previously studied in Gentzkow et al. (2014) to characterize the identified region of marginal costs.

Suggested Citation

Pesendorfer, Martin and Otsu, Taisuke and Sasaki, Yuya and Takahashi, Yuya, Estimation of (Static or Dynamic) Games Under Equilibrium Multiplicity (January 2020). CEPR Discussion Paper No. DP14342, Available at SSRN: https://ssrn.com/abstract=3526068

Martin Pesendorfer

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 20 7955 6783 (Phone)
+44 20 7831 1840 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Taisuke Otsu (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Yuya Sasaki

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States

Yuya Takahashi

University of Washington ( email )

Seattle, WA 98195
United States

HOME PAGE: http://https://econ.washington.edu/people/yuya-takahashi

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