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Random coefficients in static games of complete information

Author

Listed:
  • Fabian Dunker
  • Stefan Hoderlein
  • Hiroaki Kaido
Abstract
Individual players in a simultaneous equation binary choice model act differently in different environments in ways that are frequently not captured by observables and a simple additive random error. This paper proposes a random coefficient specification to capture this type of heterogeneity in behaviour, and discusses nonparametric identification and estimation of the distribution of random coefficients. We establish nonparametric point identification of the joint distribution of all random coefficients, except those on the interaction effects, provided the players behave competitively in all markets. Moreover, we establish set identification of the density of the coefficients on the interaction effects, and provide additional conditions that allow to point identify this density. Since our identification strategy is constructive throughout, it allows us to construct sample counterpart estimators. We analyse their asymptotic behaviour, and illustrate their finite sample behaviour in a numerical study. Finally, we discuss several extensions, like the semiparametric case, or correlated random coefficients.

Suggested Citation

  • Fabian Dunker & Stefan Hoderlein & Hiroaki Kaido, 2013. "Random coefficients in static games of complete information," CeMMAP working papers 12/13, Institute for Fiscal Studies.
    • Handle: RePEc:azt:cemmap:12/13
    DOI: 10.1920/wp.cem.2013.1213
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Christoph Breunig & Stefan Hoderlein, 2018. "Specification testing in random coefficient models," Quantitative Economics, Econometric Society, vol. 9(3), pages 1371-1417, November.
    2. Fabian Dunker & Stefan Hoderlein & Hiroaki Kaido, 2017. "Nonparametric identification of random coefficients in endogenous and heterogeneous aggregate demand models," CeMMAP working papers 11/17, Institute for Fiscal Studies.
    3. Fabian Dunker & Stefan Hoderlein & Hiroaki Kaido, 2014. "Nonparametric identification of endogenous and heterogeneous aggregate demand models: complements, bundles and the market level," CeMMAP working papers 23/14, Institute for Fiscal Studies.
    4. Jeremy Fox & Natalia Lazzati, 2013. "Identification of discrete choice models for bundles and binary games," CeMMAP working papers CWP04/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    5. Christoph Breunig & Stefan Hoderlein, 2016. "Nonparametric Specification Testing in Random Parameter Models," Boston College Working Papers in Economics 897, Boston College Department of Economics.
    6. Matzkin, Rosa L., 2019. "Constructive identification in some nonseparable discrete choice models," Journal of Econometrics, Elsevier, vol. 211(1), pages 83-103.
    7. Fabian Dunker & Konstantin Eckle & Katharina Proksch & Johannes Schmidt-Hieber, 2017. "Tests for qualitative features in the random coefficients model," Papers 1704.01066, arXiv.org, revised Mar 2018.
    8. Dunker, Fabian & Hoderlein, Stefan & Kaido, Hiroaki & Sherman, Robert, 2018. "Nonparametric identification of the distribution of random coefficients in binary response static games of complete information," Journal of Econometrics, Elsevier, vol. 206(1), pages 83-102.

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    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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