Econometrica: Sep 2012, Volume 80, Issue 5
Sequential Estimation of Structural Models With a Fixed Point Constraint
https://doi.org/10.3982/ECTA8291
p.
2303-2319
Hiroyuki Kasahara, Katsumi Shimotsu
This paper considers the estimation problem of structural models for which empirical restrictions are characterized by a fixed point constraint, such as structural dynamic discrete choice models or models of dynamic games. We analyze a local condition under which the nested pseudo likelihood (NPL) algorithm converges to a consistent estimator, and derive its convergence rate. We find that the NPL algorithm may not necessarily converge to a consistent estimator when the fixed point mapping does not have a local contraction property. To address the issue of divergence, we propose alternative sequential estimation procedures that can converge to a consistent estimator even when the NPL algorithm does not.Log In To View Full Content