Discrete games with flexible information structures: an application to local grocery markets

Game-theoretic models are frequently employed to study strategic interaction between agents. Empirical research has focused on estimating payoff functions while maintaining strong assumptions regarding the information structure of the game. I show how to relax informational assumptions to enhance th...

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Bibliographic Details
Published inThe Rand journal of economics Vol. 45; no. 2; pp. 303 - 340
Main Author Grieco, Paul L. E.
Format Journal Article
LanguageEnglish
Published Santa Monica Blackwell Publishing Ltd 01.06.2014
Wiley Periodicals, Inc
Wiley
Rand Corporation
Subjects
1995-2006
Analysis
Contrafactuals
Econometrics
Economic competition
Economic models
Economic theory
Estimation
Game theory
Grocery stores
Inference
Information
Information modeling
Informationsverbreitung
Lebensmittelhandel
Market analysis
Modeling
Parametric models
Pay-off
Qualitative analysis
Spieltheorie
Studies
USA
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ISSN0741-6261
1756-2171
DOI10.1111/1756-2171.12052

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Summary:Game-theoretic models are frequently employed to study strategic interaction between agents. Empirical research has focused on estimating payoff functions while maintaining strong assumptions regarding the information structure of the game. I show how to relax informational assumptions to enhance the credibility of empirical analysis in discrete games. I apply the method to data on the entry and exit patterns of grocery stores. The model provides useful bounds on equilibrium outcomes. In addition, the empirical analysis indicates that more restrictive informational assumptions can generate qualitatively misleading counterfactual outcomes.
Bibliography:ArticleID:RAND12052
ark:/67375/WNG-GFBL07KJ-7
Dissertation committee: Aviv Nevo, Rob Porter, Mark Satterthwaite, and Elie Tamer
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I gratefully acknowledge the help and support of my dissertation committee: Aviv Nevo, Rob Porter, Mark Satterthwaite, and Elie Tamer. The data for this project was generously provided by Paul Ellickson. I also benefited from many conversations and discussions of earlier drafts with Guy Arie, Ivan Canay, Ulrich Doraszelski, Pierre Dubois, Jon Gemus, Gautam Gowrisankaran, Ed Green, Kei Kawai, Michael Mazzeo, Francesca Molinari, Joris Pinske, Ryan McDevitt, Mark Roberts, Katja Seim, Mauricio Valera, Chris Vickers, and Quang Vuong. I thank Ali Hortacsu and two anonymous referees for providing comments which substantially improved the article. I am also grateful for comments from seminar audiences at Johns Hopkins University, University of Wisconsin‐Madison, University of Arizona, Stanford University, The Econometric Society World Congress 2010 in Shanghai, the Southern Economic Association 2010 Meetings in Atlanta, and the IIOC 2011 meetings in Boston. All remaining errors are my own.
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ISSN:0741-6261
1756-2171
DOI:10.1111/1756-2171.12052