TY  - JOUR
AU  - Bajari,Patrick
AU  - Hong,Han
AU  - Ryan,Stephen
TI  - Identification and Estimation of Discrete Games of Complete Information
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 301
PY  - 2004
Y2  - October 2004
UR  - http://www.nber.org/papers/t0301
L1  - http://www.nber.org/papers/t0301.pdf
N1  - Author contact info:
Patrick Bajari
University of Washington
331 Savery Hall
UW Economics Box 353330
Seattle, Washington 98195-3330
E-Mail: Bajari@uw.edu

Han Hong
Landau Economics Building
579 Serra Mall
Stanford, CA 94305
E-Mail: doubleh@stanford.edu
AB  - We discuss the identification and estimation of discrete games of complete information. Following Bresnahan and Reiss (1990, 1991), a discrete game is a generalization of a standard discrete choice model where utility depends on the actions of other players. Using recent algorithms to compute all  of the Nash equilibria to a game, we propose simulation-based estimators for static, discrete games. With appropriate exclusion restrictions about how covariates enter into payoffs and influence equilibrium selection, the model is identified with only weak parametric assumptions. Monte Carlo evidence demonstrates that the estimator can perform well in moderately-sized samples. As an application, we study the strategic decision of firms in spatially-separated markets to establish a presence on the Internet.
ER  -