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Multiplicity of equilibria and information structures in empirical games: challenges and prospects

Session at the 9th Triennial Choice Symposium

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Abstract

Empirical models of strategic games are central to much analysis in marketing and economics. However, two challenges in applying these models to real-world data are that such models often admit multiple equilibria and that they require strong informational assumptions. The first implies that the model does not make unique predictions about the data, and the second implies that results may be driven by strong a priori assumptions about the informational setup. This article summarizes recent work that seeks to address both issues and suggests some avenues for future research.

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Notes

  1. See Doraszelski and Pakes (2007) for a broad review.

  2. See Figure 1 in Besanko et al. (2010a) and Figure 1 in Borkovsky et al. (2012) for examples.

  3. See Besanko et al. (2010b, c), Borkovsky et al. (2010, 2012), and Besanko et al. (2013).

  4. See Narayanan (2013) and Misra (2013) for Bayesian approaches to estimate complete or incomplete information games, respectively, that mix over equilibrium.

  5. This would build on Grieco (2014), which allows for the possibility that multiple equilibria are played in the data within the context of a static discrete game.

  6. All the solution homotopy methods (Judd, Renner and Schmedders 2012) have the potential to be very useful in this respect.

  7. An early example of empirical research that incorporates learning into games is provided by Gardete and Pedro (2013).

  8. Lee and Pakes (2009) explore the implications for equilibrium selection of best reply and fictitious play learning processes within the context of a static game of bank ATM allocation.

  9. See Gureckis and Love (2013) for a review of reinforcement learning.

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Correspondence to Ron N. Borkovsky.

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Ron N. Borkovsky, Paul B. Ellickson and Brett R. Gordon were the co-chairs of the session at the 9th Triennial Choice Symposium.

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Borkovsky, R.N., Ellickson, P.B., Gordon, B.R. et al. Multiplicity of equilibria and information structures in empirical games: challenges and prospects. Mark Lett 26, 115–125 (2015). https://doi.org/10.1007/s11002-014-9308-z

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