Robust Identification in Repeated Games: An Empirical Approach to Algorithmic Competition

Antonio Cozzolino (), Cristina Gualdani (), Ivan Gufler (), Niccolò Lomys () and Lorenzo Magnolfi ()
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Antonio Cozzolino: NYU Stern, New York University, New York, NY, USA
Cristina Gualdani: School of Economics and Finance, Queen Mary University of London, London, UK
Ivan Gufler: Department of Economics and Finance, University of Bonn, Bonn, Germany
Niccolò Lomys: CSEF and Department of Economics and Statistics, University of Naples Federico II, Naples, Italy
Lorenzo Magnolfi: Department of Economics, University of Wisconsin-Madison, Madison, WI, USA

No 25-04, Working Papers from NET Institute

Abstract: We develop an econometric framework for recovering structural primitives---such as marginal costs---from price or quantity data generated by firms whose decisions are governed by reinforcement-learning algorithms. Guided by recent theory and simulations showing that such algorithms can learn to approximate repeated-game equilibria, we impose only the minimal optimality conditions implied by equilibrium, while remaining agnostic about the algorithms’ hidden design choices and the resulting conduct---competitive, collusive, or anywhere in between. These weak restrictions yield set identification of the primitives; we characterise the resulting sets and construct estimators with valid confidence regions. Monte~Carlo simulations confirm that our bounds contain the true parameters across a wide range of algorithm specifications, and that the sets tighten substantially when exogenous demand variation across markets is exploited. The framework thus offers a practical tool for empirical analysis and regulatory assessment of algorithmic behaviour.

Keywords: Algorithms; Reinforcement Learning; Repeated Games; Coarse Correlated Equilibrium; Partial Identification; Incomplete Models (search for similar items in EconPapers)
JEL-codes: C1 C5 C7 D8 L1 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2025-09
New Economics Papers: this item is included in nep-com
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