Bayesian estimation of discrete games of complete information

Sridhar Narayanan ()
Additional contact information
Sridhar Narayanan: Stanford University

Quantitative Marketing and Economics (QME), 2013, vol. 11, issue 1, No 3, 39-81

Abstract: Abstract Estimation of discrete games of complete information, which have been applied to a variety of contexts such as market entry, technology adoption and peer effects, is challenging due to the presence of multiple equilibria. In this paper, we take a Bayesian MCMC approach to this problem, specifying a prior over multiple equilibrium selection mechanisms reflecting the analysts uncertainty over them. We develop a sampler, using the reversible jump algorithm to generate draws from the posterior distribution of parameters across these equilibrium selection rules. The algorithm is flexible in that it can be used both in situations where the equilibrium selection rule is identified and when it is not, and accommodates heterogeneity in equilibrium selection. We explore the methodology using both simulated data and two empirical applications, one in the context of joint consumption, using a dataset of casino visit decisions by married couples, and the second in the context of market entry by competing chains in the retail stationery market. We demonstrate the importance of accounting for multiple equilibrium selection rules in these applications and show that taking an empirical approach to the issue, such as the one we have demonstrated, can be useful.

Keywords: Discrete games; Multiple equilibria; Bayesian estimation; Markov Chain Monte Carlo methods; Reversible jump algorithm (search for similar items in EconPapers)
JEL-codes: C11 C31 C35 M31 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://link.springer.com/10.1007/s11129-012-9127-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:qmktec:v:11:y:2013:i:1:d:10.1007_s11129-012-9127-6

Ordering information: This journal article can be ordered from
http://www.springer. ... ng/journal/11129/PS2

DOI: 10.1007/s11129-012-9127-6

Access Statistics for this article

Quantitative Marketing and Economics (QME) is currently edited by Pradeep Chintagunta

More articles in Quantitative Marketing and Economics (QME) from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().