(Job Market Candidate)
Department of Economics
University of Michigan, Ann Arbor
611 Tappan Street, Lorch Hall
Ann Arbor, MI 48109-1220
Phone: +1 (734) 846-5444
I am a job candidate in the Department of Economics at University of Michigan, Ann Arbor. I am on the academic job market for 2013-2014 and will be attending the ASSA meeting in Philadelphia, January 3-5, 2014.
Fields of Interest
Industrial Organization, Econometrics, Labor Economics
This paper studies semiparametric point identification and estimation of entry games of complete information and proposes a root-n consistent estimator. The proposed method focuses on a two-player entry game using an example of discount retailers, where the potential profit of one retailer depends on the actions of its competitor, and the unobserved heterogeneity of two retailers can be correlated. These two features lead to two challenges in identification and estimation: multiple equilibria and endogeneity. To address these two challenges, the paper provides a new identification and estimation strategy under a symmetry condition on unobservables. This new identification procedure requires neither an equilibrium selection rule of multiple equilibria nor parametric distributional assumptions of unobserved heterogeneities to solve the endogeneity problem. It also requires a weaker support condition than the existing literature. Following the identification argument, the paper proposes a semiparimetric two-step estimation procedure using plug-in kernel estimators. Given the symmetry assumption, this paper shows that the proposed estimator is root-n consistent, unlike existing estimators for this model. A Monte Carlo simulation demonstrates that the estimator performs well in moderate-sized samples and is robust to the bandwidth choices for the kernel estimator. As an application, this paper applies the new method to the entry game of discount retailers in Jia (2008). These findings complement the existing literature of entry games on semiparametric identification and estimation.