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Modified-likelihood estimation of the β-model

Author

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  • Koen Jochmans

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

We consider point estimation and inference based on modifications of the profile likelihood in models for dyadic interactions between agents featuring n agent-specific parameters. This setup covers the b-model of network formation and generalizations thereof. The maximum-likelihood estimator of such models has bias and standard deviation of O(n−1) and so is asymptotically biased. Estimation based on modified likelihoods leads to estimators that are asymptotically unbiased and likelihood-ratio tests that exhibit correct size. We apply the modifications to versions of the b-model for network formation and of the Bradley-Terry model for paired comparisons.

Suggested Citation

  • Koen Jochmans, 2016. "Modified-likelihood estimation of the β-model," SciencePo Working papers hal-03393203, HAL.
    • Handle: RePEc:hal:wpspec:hal-03393203
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03393203
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