Inference in ordered response games with complete information

Andres Aradillas-Lopez and Adam Rosen

No CWP33/13, CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies

Abstract: We study econometric models of complete information games with ordered action spaces, such as the number of store fronts operated in a market by a firm, or the daily number of flights on a city-pair offered by an airline. The model generalises single agent models such as ordered probit and logit to a simultaneous model of ordered response. We characterise identified sets for model parameters under mild shape restrictions on agents' payoff functions. We then propose a novel inference method for a parametric version of our model based on a test statistic that embeds conditional moment inequalities implied by equilibrium behaviour. Using maximal inequalities for U-processes, we show that an asymptotically valid confidence set is attained by employing an easy to compute fixed critical value, namely the appropriate quantile of a chi-square random variable. We apply our method to study capacity decisions measured as the number of stores operated by Lowe's and Home Depot in geographic markets. We demonstrate how our confidence sets for model parameters can be used to perform inference on other quantities of economic interest, such as the probability that any given outcome is an equilibrium and the propensity with which any particular outcome is selected when it is one of multiple equilibria.

Keywords: discrete games; ordered response; partial identification; conditional moment inequalities (search for similar items in EconPapers)
JEL-codes: C01 C31 C35 (search for similar items in EconPapers)
Date: 2013-07-29
New Economics Papers: this item is included in nep-dcm and nep-ecm
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Inference in ordered response games with complete information (2022)
Working Paper: Inference in ordered response games with complete information (2021)
Working Paper: Inference in ordered response games with complete information (2021)
Working Paper: Inference in Ordered Response Games with Complete Information (2014)
Working Paper: Inference in Ordered Response Games with Complete Information (2014)
Working Paper: Inference in ordered response games with complete information (2013)
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