NATIONAL BUREAU OF ECONOMIC RESEARCH
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Estimating Dynamic Games of Oligopolistic Competition: An Experimental Investigation

Tobias Salz, Emanuel Vespa

NBER Working Paper No. 26765
Issued in February 2020
NBER Program(s):Industrial Organization

We evaluate dynamic oligopoly estimators with laboratory data. Using a stylized en-try/exit game, we estimate structural parameters under the assumption that the data are generated by a Markov-perfect equilibrium (MPE) and use the estimates to predict counterfactual behavior. The concern is that if the Markov assumption was violated one would mispredict counterfactual outcomes. The experimental method allows us to compare predicted behavior for counterfactuals to true counterfactuals implemented as treatments. Our main finding is that counterfactual prediction errors due to collusion are in most cases only modest in size.

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Document Object Identifier (DOI): 10.3386/w26765

Published: Tobias Salz & Emanuel Vespa, 2020. "Estimating dynamic games of oligopolistic competition: an experimental investigation," The RAND Journal of Economics, vol 51(2), pages 447-469.

 
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