Abstract
We develop a minimum distance estimator for dynamic games of incomplete in- formation. We take a two-step approach, following Hotz and Miller (1993), based on the pseudo-model that does not solve the dynamic equilibrium so as to cir- cumvent the potential indeterminacy issues associated with multiple equilibria. The class of games estimable by our methodology includes the familiar discrete unordered action games as well as games where players’ actions are monotone (discrete, continuous, or mixed) in the their private values. We also provide con- ditions for the existence of pure strategy Markov perfect equilibria in monotone action games under increasing differences condition. Keywords. Dynamic games, Markov perfect equilibrium, semiparametric esti- mation with nonsmooth objective functions. JEL classification. C13, C14, C15, C51.
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