A Method for Implementing Counterfactual Experiments in Models with Multiple Equilibria

13 Pages Posted: 25 Jul 2012 Last revised: 30 Oct 2016

See all articles by Victor Aguirregabiria

Victor Aguirregabiria

University of Toronto - Department of Economics

Date Written: February 1, 2012

Abstract

This paper proposes a simple homotopy method for implementing counterfactual experiments in estimated models with multiple equilibria. The key assumption in this method is that the (unknown) equilibrium selection function does not jump discontinuously between equilibria as we change continuously the value of the structural parameters.

Keywords: Structural models with multiple equilibria, Counterfactual experiments, Equilibrium selection

JEL Classification: C10, C60, L10

Suggested Citation

Aguirregabiria, Victor, A Method for Implementing Counterfactual Experiments in Models with Multiple Equilibria (February 1, 2012). Economics Letters, Vol. 114, No. 2, 2012, Available at SSRN: https://ssrn.com/abstract=2117013

Victor Aguirregabiria (Contact Author)

University of Toronto - Department of Economics ( email )

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