This paper reviews a framework for numerically analyzing dynamic interactions in imperfectly competitive industries. The framework dates back to Ericson & Pakes (1995), but it is based on equilibrium notions that had been available for some time be-fore, and it has been extended in many ways by different authors since. The framework requires as input a set of primitives which describe the institutional structure in the industry to be analyzed. The framework outputs profits and policies for every incum-bent and potential entrant at each possible state of the industry. These policies can be used to simulate the distribution of sample paths for all firms from any initial industry structure. The sample paths generated by the model can be quite different depending on the primitives that are fed into it, and most of the extensions were designed to enable the framework to accommodate empirically relevant cases that required modification of the initial structure. The sample paths possess similar properties to those observed in (the recently made available) panel data sets on industries. These sample paths can be used either for an analysis of the likely response to a policy or an environmental change,

This paper studies the identification problem in infinite horizon Markovian games and proposes a generally applicable estimation method. Every period firms simultaneously select an action from a finite set.We characterize the set of Markov equilibria. Period profits are a linear function of equilibrium choice probabilities. The question of identifi¯cation of these values is then reduced to the existence of a solution to this linear equation system. We characterize the identification conditions. We propose a simple estimation procedure which follows the steps in the identifiation argument. The estimator is consistent, asymptotic normally distributed, and e±cient. We have collected quarterly time series data on pubs, restaurants, coffeehouses, bakeries and carpenters for two Austrian towns between 1982 and 2002. A dynamic entry game is estimated in which firms simultaneously decide whether to enter, remain active, or exit the industry. The period profit estimates are used to simulate the equilibrium behavior unfier a policy experiment in which a unit tax is imposed on ¯rms deciding to enter the industry.

Many government policies either target the underlying supply infrastructure or have indirect effects on market structure. In this paper we seek to understand the impact of the Critical Access Hospital (CAH) program on the U.S. rural hospital infrastructure and societal welfare. This program provides generous reimbursement to hospitals in exchange for size and service limitations. We specify and estimate a model of the rural hospital industry in which hospitals choose investment, exit, prices and conversion to CAH status. Because these choices have dynamic impacts and even rural hospitals have geographically close competitors, we model hospitals as a dynamic oligopoly. We estimate the structural parameters from this model using a two-step inference method and assess the structural and welfare impacts of the CAH program. Our methods extend current estimation techniques for dynamic oligopoly models to allow for investment behaviors that are more consistent with the data. Our estimated parameters on investment costs and the costs of CAH conversion appear reasonable in magnitude. Preliminary results reveal that the CAH program increases the profits of converting hospitals by $260,000 and decreases exits by 5%.

Sponsored search advertising is ascendant — Jupiter Research reports expenditures rose 28 % in 2007 to $8.9B and will continue to rise at a 15 % CAGR, making it one of the major trends to affect the marketing landscape. Yet little, if any empirical research focuses upon search engine marketing strategy by integrating the behavior of various agents in sponsored search advertising (i.e., searchers, advertisers, and the search engine platform). The dynamic structural model we propose serves as a foundation to explore these and other sponsored search advertising phenomena. Fitting the model to a proprietary data set provided by an anonymous search engine, we conduct several policy simulations to illustrate the benefits of our approach. First, we explore how information asymmetries between search engines and advertisers can be exploited to enhance platform revenues. This has consequences for the pricing of market intelligence. Second, we assess the effect of allowing advertisers to bid not only on key words, but also by consumers searching histories and demographics thereby creating a more targeted model of advertising. Third, we explore several different auction pricing mechanisms and assess the role of each on engine and advertiser profits and revenues. Finally, we consider the role of consumer search tools such as sorting on consumer

Abstract: Online Auction Demand With $40BB in annual gross merchandise volume, electronic auctions comprise a substantial and growing sector of the retail economy. Using unique data on Celtic coins, we estimate a structural model of buyer and seller behavior via MCMC with data augmentation. Results indicate that buyer valuations are a¤ected by item, seller, and auction characteristics; buyer costs are impacted by bidding behavior; and seller costs are a¤ected by item characteristics and the number of listings. The model enables us to compute fee elasticities even though there exists no variation in fees in our data. We …nd commission elasticities exceed per-item fee elasticities because they target high value sellers and enhance their listing likelihood. By targeting commission reductions to high value sellers auction house revenues can be increased by 3.9%. Computing customer value, we …nd attrition of the largest seller would decrease fees paid to the auction house by $97. Given the seller paid $127 in fees, competitive e¤ects o¤set only 24 % of the fees paid by the seller. In contrast, competition o¤sets 81 % of the buyer attrition e¤ect. In both events, the auction house would overvalue its customers by neglecting competitive e¤ects.

[Preliminary — please do not cite]

Abstract not found

We construct a model of participation and bidding at multi-unit, sequential, ascending-price auctions when bidders can potentially have multi-unit demand. We then describe conditions sufficient to characterize a strategic equilibrium of the auction game. Subsequently, we demonstrate that this equilibrium induces an efficient allocation and then propose an algorithm to calculate the expected winning price for each unit sold. We use this algorithm to develop a simulation-based, structural-econometric estimation strategy to calculate parameter estimates of both the participation process and the distribution of latent valuations using commonly-available data. We illustrate the feasibility of our approach by applying it to data from a small sample of timber export-permit auctions held in the Krasnoyarsk Region of Russia.

Within the independent private-values paradigm, we derive the data-generating process of the winning bids for two different objects sold sequentially at English auction assuming the valuations across objects for a particular bidder are potentially dependent. We then illustrate that, in general, the model is unidentified, but that a model within the Archimedean family of copulas is identified. Under the copula assumption, using just the observed winning bids, we propose a semiparametric estimation strategy to recover the joint distribution of valuations. We implement our methods using data from a fish auction held in Gren˚a, Denmark.

This paper explores the nature of ‡uctuations in world bulk shipping by quantifying the impact of time-to-build and demand uncertainty on investment and prices. We examine the impact of both construction lags and their lengthening in periods of high investment activity, by constructing a dynamic model of ship entry and exit. A rich dataset of second-hand ship sales allows for a new estimation strategy: resale prices provide direct information on value functions and allow their nonparametric estimation. We …nd that moving from time-varying to constant to no time-to-build reduces prices, while signi…cantly increasing both the level and volatility of investment.