A Genetic Algorithm for the Structural Estimation of Games with Multiple Equilibria

New Mathematics and Natural Computation, Vol. 1, Number 2, 295-303.

18 Pages Posted: 4 Mar 2005 Last revised: 30 Oct 2016

See all articles by Victor Aguirregabiria

Victor Aguirregabiria

University of Toronto - Department of Economics

Pedro Mira

Centro de Estudios Monetarios y Financieros (CEMFI)

Date Written: July 1, 2005

Abstract

This paper proposes an algorithm to obtain maximum likelihood estimates of structural parameters in discrete games with multiple equilibria. The method combines a genetic algorithm (GA) with a pseudo maximum likelihood (PML) procedure. The GA searches efficiently over the huge space of possible combinations of equilibria in the data. The PML procedure avoids the repeated computation of equilibria for each trial value of the parameters of interest. To test the ability of this method to get maximum likelihood estimates, we present a Monte Carlo experiment in the context of a game of price competition and collusion.

Keywords: Empirical games, Maximum likelihood estimation, Multiple equilibria, Genetic algorithms

JEL Classification: C13, C35

Suggested Citation

Aguirregabiria, Victor and Mira, Pedro, A Genetic Algorithm for the Structural Estimation of Games with Multiple Equilibria (July 1, 2005). New Mathematics and Natural Computation, Vol. 1, Number 2, 295-303., Available at SSRN: https://ssrn.com/abstract=675881 or http://dx.doi.org/10.2139/ssrn.675881

Victor Aguirregabiria (Contact Author)

University of Toronto - Department of Economics ( email )

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4169784358 (Phone)

HOME PAGE: http://individual.utoronto.ca/vaguirre/

Pedro Mira

Centro de Estudios Monetarios y Financieros (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain
34 91 429 0551 (Phone)
34 91 429 1056 (Fax)

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