A Modified Likelihood Approach for Models with Parameter-Dependent Support

Yao Luo ()
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Yao Luo: University of Toronto

Annals of Economics and Finance, 2024, vol. 25, issue 2, 675-703

Abstract: In structural models with parameter-dependent support, maximum likeli-hood problems are nonregular. We reformulate these problems by parameter-dependent transformations and propose modified likelihood estimators that have regular asymptotic properties. We then describe several applications to search models, auction models and frontier production functions and demonstrate the performance of our method through Monte Carlo simulations. Lastly, we apply the method to a Vuong non-nested test of additive v.s. multiplicative separable auction-specific heterogeneity in Michigan Department of Transportation procurements.

Keywords: Boundary model; Job search; Auction; Frontier production function; Sutton's bound test; Vuong test (search for similar items in EconPapers)
JEL-codes: C12 C13 C57 J64 L11 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2024:v:25:i:2:luo

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