ESTIMATION OF (STATIC OR DYNAMIC) GAMES UNDER EQUILIBRIUM MULTIPLICITY

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 n...

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Bibliographic Details
Published inInternational economic review (Philadelphia) Vol. 63; no. 3; pp. 1165 - 1188
Main Authors Otsu, Taisuke, Pesendorfer, Martin, Sasaki, Yuya, Takahashi, Yuya
Format Journal Article
LanguageEnglish
Published Philadelphia Blackwell Publishing Ltd 01.08.2022
Subjects
Economic theory
Games
Marginal costs
Optimization
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Summary: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 infinite‐dimensional optimization problem, we consider the equivalent finite‐dimensional dual problem. 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. (American Economic Review 104 (2014), 3073–114) to characterize the identified region of marginal costs.
ISSN:0020-6598
1468-2354
DOI:10.1111/iere.12564