Abstract

I examine an equilibrium and four prevalent disequilibrium model specifications under joint-normally distributed shocks and propose a statistical method for assessing whether a market is in an equilibrium state. I derive the marginal effects on the shortage probabilities and illustrate how one can interpret them. I provide analytic expressions for the gradients of all the models and the Hessians of the equilibrium and two of the disequilibrium models. Lastly, I use simulations to illustrate the performance of the models concerning, firstly, their estimation accuracy and, secondly, the computational gains of using gradient-based likelihood optimization methods.

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