A Method for Implementing Counterfactual Experiments in Models with Multiple Equilibria
13 Pages Posted: 25 Jul 2012 Last revised: 30 Oct 2016
Date Written: February 1, 2012
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: Suggested Citation