Testing for equilibrium multiplicity in dynamic Markov games

Otsu, Taisuke ORCID: 0000-0002-2307-143X, Pesendorfer, Martin ORCID: 0000-0002-0547-8711 and Takahashi, Yuya (2013) Testing for equilibrium multiplicity in dynamic Markov games. Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems (423).

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Abstract

This paper proposes several statistical tests for finite state Markov games to examine the null hypothesis that the data are generated from a single equilibrium. We formulate tests of (i) the conditional choice probabilities, (ii) the steady-state distribution of states and (iii) the conditional distribution of states conditional on an initial state. In a Monte Carlo study we find that the chi-squared test of the steady-state distribution performs well and has high power even with a small number of markets and time periods. We apply the chi-squared test to the empirical application of Ryan (2012) that analyzes dynamics of the U.S. Portland Cement industry and test if his assumption of single equilibrium is supported by the data.

Item Type:	Monograph (Working Paper)
Official URL:	https://ideas.repec.org/p/trf/wpaper/423.html
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory Q Science > QA Mathematics
JEL classification:	C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C12 - Hypothesis Testing C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions
Date Deposited:	08 Oct 2019 15:57
Last Modified:	01 Nov 2024 04:57
URI:	http://eprints.lse.ac.uk/id/eprint/101968

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