Estimating dynamic games of oligopolistic competition: an experimental investigation
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sv_dynamic_oligopoly.pdf
Description
Submitted version
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875.6 KB
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Author(s)
Salz, Tobias
Vespa, Emanuel
Date Issued
June 2020
Journal
RAND Journal of Economics
Publisher
Wiley
Citation
Salz, Tobias and Emanuel Vespa. "Estimating dynamic games of oligopolistic competition: an experimental investigation." RAND Journal of Economics 51, 2 (June 2020): 447-469. © 2020 The RAND Corporation.
Version
Original manuscript
Abstract
We evaluate standard assumptions in the estimation of dynamic oligopoly models with laboratory data. Using an entry/exit game, we estimate structural parameters under the assumption that the data are generated by a Markov-perfect equilibrium and subsequently predict counterfactual behavior. If behavior was collusive, however, the assumption would be violated and one would mispredict counterfactuals. The laboratory allows us to compare predicted behavior to true counterfactuals implemented as treatments. Our main finding is that prediction errors due to collusion are modest in size. We also document a different deviation from equilibrium behavior (inertia) that can lead to large prediction errors.
MIT Department
Massachusetts Institute of Technology. Department of Economics
Sloan School of Management
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Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1111/1756-2171.12321
