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Generalized Maximum Entropy Estimation of Discrete Sequential Move Games of Perfect Information

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  • Yafeng Wang
  • Brett Graham

Abstract

We propose a data-constrained generalized maximum entropy estimator for discrete sequential move games of perfect information. Unlike most other work on the estimation of complete information games, the method we proposed is data constrained and requires o simulation or assumptions about the distribution of random preference shocks. We formulate the GME estimation as a (convex) mixed-integer nonlinear optimization problem which can be easily implemented on optimization software with high-level interfaces such as GAMS. The model is identified with only weak scale and location normalizations. Monte Carlo evidence demonstrates that the estimator can perform well in moderately size samples. As an application we study the location choice of German siblings using the German Ageing Survey.

Suggested Citation

  • Yafeng Wang & Brett Graham, 2013. "Generalized Maximum Entropy Estimation of Discrete Sequential Move Games of Perfect Information," Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    • Handle: RePEc:wyi:wpaper:002036
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    References listed on IDEAS

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    More about this item

    Keywords

    Game-Theoretic Econometric Models; Sequential-Move Game; Generalized ，Maximum Entropy; Mixed-Integer Nonlinear Programming.;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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