TY  - JOUR
AU  - Bajari,Patrick
AU  - Benkard,C. Lanier
AU  - Levin,Jonathan
TI  - Estimating Dynamic Models of Imperfect Competition
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10450
PY  - 2004
Y2  - April 2004
UR  - http://www.nber.org/papers/w10450
L1  - http://www.nber.org/papers/w10450.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

C. Lanier Benkard
Stanford Graduate School of Business
655 Knight Way
Stanford, CA 94305
Tel: 650 725-2173
E-Mail: lanierb@stanford.edu

Jonathan D. Levin
Stanford University
Department of Economics
579 Serra Mall
Stanford, CA  94305-6072
Tel: 650/723-5962
E-Mail: jdlevin@stanford.edu
AB  - We describe a two-step algorithm for estimating dynamic games under the assumption that behavior is consistent with Markov Perfect Equilibrium. In the first step, the policy functions and the law of motion for the state variables are estimated. In the second step, the remaining structural parameters are estimated using the optimality conditions for equilibrium. The second step estimator is a simple simulated minimum distance estimator. The algorithm applies to a broad class of models, including I.O. models with both discrete and continuous controls such as the Ericson and Pakes (1995) model. We test the algorithm on a class of dynamic discrete choice models with normally distributed errors, and a class of dynamic oligopoly models similar to that of Pakes and McGuire (1994).
ER  -