An MPEC Estimator for the Sequential Search Model

Shinji Koiso and Suguru Otani

Papers from arXiv.org

Abstract: This paper proposes a constrained maximum likelihood estimator for sequential search models, using the MPEC (Mathematical Programming with Equilibrium Constraints) approach. This method enhances numerical accuracy while avoiding ad hoc components and errors related to equilibrium conditions. Monte Carlo simulations show that the estimator performs better in small samples, with lower bias and root-mean-squared error, though less effectively in large samples. Despite these mixed results, the MPEC approach remains valuable for identifying candidate parameters comparable to the benchmark, without relying on ad hoc look-up tables, as it generates the table through solved equilibrium constraints.

Date: 2024-09
New Economics Papers: this item is included in nep-ecm
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