Constrained Optimization Approaches to Estimation of Structural Models: Comment

Fedor Iskhakov, Jinhyuk Lee, John Rust (), Bertel Schjerning and Kyoungwon Seo
Additional contact information
Jinhyuk Lee: Ulsan National Institute of Science and Technology
Kyoungwon Seo: Korea Advanced Institute of Science and Technology

No 15-05, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: We revisit the comparison of mathematical programming with equilibrium constraints (MPEC) and nested fixed point (NFXP) algorithms for estimating structural dynamic models by Su and Judd (SJ, 2012). They used an inefficient version of the nested fixed point algorithm that relies on successive approximations. We re-do their comparison using the more efficient version of NFXP proposed by Rust (1987), which combines successive approximations and Newton-Kantorovich iterations to solve the fixed point problem (NFXP-NK). We show that MPEC and NFXP-NK are similar in performance when the sample size is relatively small. However, in problems with larger sample sizes, NFXP-NK outperforms MPEC by a significant margin.

Keywords: Structural estimation; dynamic discrete choice; NFXP; MPEC; successive approximations; Newton-Kantorovich algorithm. (search for similar items in EconPapers)
JEL-codes: C10 C44 C61 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2015-03-23
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.econ.ku.dk/english/research/publications/wp/dp_2015/1505.pdf (application/pdf)

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:kud:kuiedp:1505

Access Statistics for this paper

More papers in Discussion Papers from University of Copenhagen. Department of Economics Oester Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().