Identification and Estimation of a Discrete Game of Complete Information
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game-stephen-august-2009-revision.pdf
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Author(s)
Bajari, Patrick
Hong, Han
Ryan, Stephen
Date Issued
September 2010
Journal
Econometrica
Publisher
Econometric Society / Wiley
Citation
Bajari, Patrick, Han Hong, and Stephen P. Ryan. “Identification and Estimation of a Discrete Game of Complete Information.” Econometrica 78.5 (2010) : 1529-1568. © 2010 The Econometric Society
Version
Author's final manuscript
Abstract
We discuss the identification and estimation of discrete games of complete information. Following Bresnahan and Reiss (1990, 1991), a discrete game is a generalization of a standard discrete choice model where utility depends on the actions of other players. Using recent algorithms to compute all of the Nash equilibria to a game, we propose simulation-based estimators for static, discrete games. We demonstrate that the model is identified under weak functional form assumptions using exclusion restrictions and an identification at infinity approach. Monte Carlo evidence demonstrates that the estimator can perform well in moderately sized samples. As an application, we study entry decisions by construction contractors to bid on highway projects in California. We find that an equilibrium is more likely to be observed if it maximizes joint profits, has a higher Nash product, uses mixed strategies, and is not Pareto dominated by another equilibrium.
MIT Department
Massachusetts Institute of Technology. Department of Economics
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Creative Commons Attribution-Noncommercial-Share Alike 3.0
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DOI of Published Version
http://dx.doi.org/10.3982/ECTA5434
https://doi.org/10.3982/ECTA5434
https://doi.org/10.3982/ECTA5434
