Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79554
Authors: 
Aradillas-Lopez, Andrew
Rosen, Adam
Year of Publication: 
2013
Series/Report no.: 
cemmap working paper, Centre for Microdata Methods and Practice CWP33/13
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 ordred 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.
Subjects: 
Discrete games
ordered response
partial identification
conditional moment inequalities
JEL: 
C01
C31
C35
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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