Empirical models of discrete games

• Published in: Journal of econometrics Vol. 48; no. 1; pp. 57 - 81
• Main Authors: Bresnahan, Timothy F., Reiss, Peter C.
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.04.1991; Elsevier; North-Holland Pub. Co; Elsevier Sequoia S.A
• Series: Journal of Econometrics
• Subjects: Applications; Applied sciences; Econometrics; Economic statistics; Exact sciences and technology; Game theory; Games; Market entry; Operational research and scientific management; Operational research. Management science; Probability; Stochastic models; Technology adoption; Utility functions; Variables; Nash strategy; Stochastic model; Econometric model; Nash equilibrium; Econometrics; Empirical model; Game theory
• ISSN: 0304-4076; 1872-6895
• DOI: 10.1016/0304-4076(91)90032-9

This paper develops econometric models for discrete games. Specifically, we model the payoffs of games where a researcher observes qualitative or censored information about agents' decisions and payoffs. These models extend single-person qualitative choice models introduced by McFadden (1974) and others to multiple-person choice problems. The equations describing players' equilibrium strategies depend on the game's structure and the equilibrium solution concept. We show that one can describe the equilibria of a simultaneous-move Nash game with a linear system of dummy endogenous variables. We also show that sequential-move and cooperative models have different, but related, econometric structures. A series of applied examples address identification and estimation issues. These examples include models of market entry, technology adoption, tax auditing, and cooperative family labor supply.