Sequential Estimation of Structural Models With a Fixed Point Constraint

doi:10.3982/ECTA8291

Sequential Estimation of Structural Models With a Fixed Point Constraint

2012-01-01

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DOI：10.3982/ECTA8291

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Abstract

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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.

Keywords:

Contraction

dynamic games

nested pseudo likelihood

recursive projection method

Sequential Estimation of Structural Models With a Fixed Point Constraint

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