Estimating Dynamic Games of Oligopolistic Competition: An Experimental Investigation

39 Pages Posted: 18 Feb 2020 Last revised: 20 Aug 2022

See all articles by Tobias Salz

Tobias Salz

MIT

Emanuel Vespa

UC Santa Barbara - Department of Economics

Date Written: February 2020

Abstract

We evaluate dynamic oligopoly estimators with laboratory data. Using a stylized en-try/exit game, we estimate structural parameters under the assumption that the data are generated by a Markov-perfect equilibrium (MPE) and use the estimates to predict counterfactual behavior. The concern is that if the Markov assumption was violated one would mispredict counterfactual outcomes. The experimental method allows us to compare predicted behavior for counterfactuals to true counterfactuals implemented as treatments. Our main finding is that counterfactual prediction errors due to collusion are in most cases only modest in size.

Suggested Citation

Salz, Tobias and Vespa, Emanuel, Estimating Dynamic Games of Oligopolistic Competition: An Experimental Investigation (February 2020). NBER Working Paper No. w26765, Available at SSRN: https://ssrn.com/abstract=3539332

Tobias Salz (Contact Author)

MIT ( email )

50 Memorial Dr
Cambridge, MA 02142
United States

HOME PAGE: http://https://economics.mit.edu/faculty/tsalz

Emanuel Vespa

UC Santa Barbara - Department of Economics ( email )

2127 North Hall University of California
Santa Barbara, CA 93117
United States

HOME PAGE: http://https://sites.google.com/site/emanuelvespa/

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