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Comment on “Constrained Optimization Approaches to Estimation of Structural Models”

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  • Fedor Iskhakov
  • Jinhyuk Lee
  • John Rust
  • Bertel Schjerning
  • Kyoungwon Seo

Abstract

We revisit the comparison of mathematical programming with equilibrium constraints (MPEC) and nested fixed point (NFXP) algorithms for estimating structural dynamic models by Su and Judd (2012). Their implementation of the nested fixed point algorithm used successive approximations to solve the inner fixed point problem (NFXP‐SA). We redo their comparison using the more efficient version of NFXP proposed by Rust (1987), which combines successive approximations and Newton–Kantorovich iterations to solve the fixed point problem (NFXP‐NK). We show that MPEC and NFXP are similar in speed and numerical performance when the more efficient NFXP‐NK variant is used.

Suggested Citation

  • Fedor Iskhakov & Jinhyuk Lee & John Rust & Bertel Schjerning & Kyoungwon Seo, 2016. "Comment on “Constrained Optimization Approaches to Estimation of Structural Models”," Econometrica, Econometric Society, vol. 84, pages 365-370, January.
    • Handle: RePEc:wly:emetrp:v:84:y:2016:i::p:365-370
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    Cited by:

    1. Patrick Kofod Mogensen, 2018. "Solving Dynamic Discrete Choice Models: Integrated or Expected Value Function?," Papers 1801.03978, arXiv.org.
    2. Victor Aguirregabiria & Mathieu Marcoux, 2021. "Imposing equilibrium restrictions in the estimation of dynamic discrete games," Quantitative Economics, Econometric Society, vol. 12(4), pages 1223-1271, November.
    3. Maximilian Blesch & Philipp Eisenhauer, 2021. "Robust decision-making under risk and ambiguity," Papers 2104.12573, arXiv.org, revised Oct 2021.
    4. Jaap H. Abbring & Jeffrey R. Campbell & Jan Tilly & Nan Yang, 2018. "Very Simple Markov-Perfect Industry Dynamics: Empirics," Working Paper Series WP-2018-17, Federal Reserve Bank of Chicago.
    5. Maximilian Blesch & Philipp Eisenhauer, 2023. "Robust Decision-Making under Risk and Ambiguity," Rationality and Competition Discussion Paper Series 463, CRC TRR 190 Rationality and Competition.
    6. Abbring, Jaap & Campbell, J.R. & Tilly, J. & Yang, N., 2018. "Very Simple Markov-Perfect Industry Dynamics (revision of 2017-021) : Empirics," Discussion Paper 2018-040, Tilburg University, Center for Economic Research.
    7. Lee, Jinhyuk & Seo, Kyoungwon, 2016. "Revisiting the nested fixed-point algorithm in BLP random coefficients demand estimation," Economics Letters, Elsevier, vol. 149(C), pages 67-70.
    8. Maximilian Blesch & Philipp Eisenhauer, 2021. "Robust Decision-Making Under Risk and Ambiguity," ECONtribute Discussion Papers Series 104, University of Bonn and University of Cologne, Germany.

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