Estimating Static Models of Strategic Interaction

54 Pages Posted: 27 Apr 2006 Last revised: 30 Oct 2022

See all articles by Patrick Bajari

Patrick Bajari

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Han Hong

Independent

John Krainer

Board of Governors of the Federal Reserve System

Denis Nekipelov

Duke University

Date Written: February 2006

Abstract

We propose a method for estimating static games of incomplete information. A static game is a generalization of a discrete choice model, such as a multinomial logit or probit, which allows the actions of a group of agents to be interdependent. Unlike most earlier work, the method we propose is semiparametric and does not require the covariates to lie in a discrete set. While the estimator we propose is quite flexible, we demonstrate that in most cases it can be easily implemented using standard statistical packages such as STATA. We also propose an algorithm for simulating the model which finds all equilibria to the game. As an application of our estimator, we study recommendations for high technology stocks between 1998-2003. We find that strategic motives, typically ignored in the empirical literature, appear to be an important consideration in the recommendations submitted by equity analysts.

Suggested Citation

Bajari, Patrick and Hong, Han and Krainer, John and Nekipelov, Denis, Estimating Static Models of Strategic Interaction (February 2006). NBER Working Paper No. w12013, Available at SSRN: https://ssrn.com/abstract=881247

Patrick Bajari (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
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734-763-5319 (Phone)

HOME PAGE: http://www-personal.umich.edu/~bajari/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Han Hong

Independent

John Krainer

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Denis Nekipelov

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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