Discriminating Methods: Tests for Non-nested Discrete Choice Models

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Abstract

We consider the problem of choosing between rival statistical models that are non-nested in terms of their functional forms. We assess the ability of two tests, one parametric and one distribution free, to discriminate between such models. Our Monte Carlo simulations demonstrate that both tests are, to varying degrees, able to discriminate between strategic and non-strategic discrete choice models. The distribution-free test appears to have greater relative power in small samples.

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