Econometrica: Mar 2010, Volume 78, Issue 2

Sequential Estimation of Dynamic Discrete Games: A Comment
p. 833-842

Martin Pesendorfer, Philipp Schmidt‐Dengler

Recursive procedures which are based on iterating on the best response mapping have difficulties converging to all equilibria in multi‐player games. We illustrate these difficulties by revisiting the asymptotic properties of the iterative nested pseudo maximum likelihood method for estimating dynamic games introduced by Aguirregabiria and Mira (2007). An example shows that the iterative method may not be consistent.

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