Working Paper: NBER ID: w10506
Authors: Ariel Pakes; Michael Ostrovsky; Steve Berry
Abstract: This paper considers the problem of estimating the distribution of payoffs in a discrete dynamic game, focusing on models where the goal is to learn about the distribution of firms' entry and exit costs. The idea is to begin with non parametric first stage estimates of entry and continuation values obtained by computing sample averages of the realized continuation values of entrants who do enter and incumbents who do continue. Under certain assumptions these values are linear functions of the parameters of the problem, and hence are not computationally burdensome to use. Attention is given to the small sample problem of estimation error in the non parametric estimates and this leads to a preference for use of particularly simple estimates of continuation values and moments.
Keywords: No keywords provided
JEL Codes: L10; C51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher estimated continuation values (J17) | Increased probabilities of firm entry (L26) |
| Higher estimated continuation values (J17) | Increased probabilities of firm continuation (D25) |
| Estimated continuation values (J17) | Understanding of firm dynamics (D21) |
| Distribution of entry and exit costs (D39) | Estimated continuation values (J17) |