Estimation of finite sequential games

Shiko Maruyama

Journal of Econometrics, 2014, vol. 178, issue 2, 716-726

Abstract: I propose a new estimation method for finite sequential games that is efficient, computationally attractive, and applicable to a fairly general class of finite sequential games that is beyond the scope of existing studies. The major challenge is the computation of high-dimensional truncated integration whose domain is complicated by strategic interaction. This complication resolves when unobserved off-the-equilibrium-path strategies are controlled for. Separately evaluating the likelihood contribution of each subgame-perfect equilibrium that generates the observed outcome allows the use of the GHK simulator, a widely used importance-sampling probit simulator. Monte Carlo experiments demonstrate the performance and robustness of the proposed method.

Keywords: Inference in discrete games; Sequential games; Monte Carlo integration; GHK simulator; Subgame perfection (search for similar items in EconPapers)
JEL-codes: C31 C35 C63 C72 (search for similar items in EconPapers)
Date: 2014
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Related works:
Working Paper: Estimation of Finite Sequential Games (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:178:y:2014:i:2:p:716-726

DOI: 10.1016/j.jeconom.2013.10.011

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