We study testable implications of multiple equilibria in discrete games with incomplete information. Unlike de Paula and Tang (2012), we allow the players’ private signals to be correlated. In static games, we leverage independence of private types across games whose equilibrium selection is correlated. In dynamic games with serially correlated discrete unobserved heterogeneity, our testable implication builds on the fact that the distribution of a sequence of choices and states are mixtures over equilibria and unobserved heterogeneity. The number of mixture components is a known function of the length of the sequence as well as the cardinality of equilibria and unobserved heterogeneity support. In both static and dynamic cases, these testable implications are implementable using existing statistical tools.
Authors
Research Fellow University College London
Áureo is an applied econometrician with strong interests in both methodological and empirical questions, affiliated with UCL, Cemmap, IFS and CEPR.
Xun Tang
Working Paper details
- DOI
- 10.47004/wp.cem.2020.5620
- Publisher
- The IFS
Suggested citation
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