Alternative Models for Moment Inequalities


  • A. Pakes

    1. Dept. of Economics, Harvard University, Littauer Room 117, Cambridge, MA 02138, U.S.A. and National Bureau of Economic Research;
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    • This paper is a revised version of part of my Fisher–Schultz Lecture presented at the World Congress of the Econometric Society in London, August 2005. The paper draws extensively from past interactions with my students and co-authors, and I would like to take this opportunity to express both my intellectual debt and my thanks to them. I like to think they enjoyed the experience as much as I did, although that might have been harder for the students in the group. For help on this paper, I owe a particular debt to Robin Lee. I also thank three referees and a co-editor for helpful comments.


Behavioral choice models generate inequalities which, when combined with additional assumptions, can be used as a basis for estimation. This paper considers two sets of such assumptions and uses them in two empirical examples. The second example examines the structure of payments resulting from the upstream interactions in a vertical market. I then mimic the empirical setting for this example in a numerical analysis which computes actual equilibria, examines how their characteristics vary with the market setting, and compares them to the empirical results. The final section uses the numerical results in a Monte Carlo analysis of the robustness of the two approaches to estimation to their underlying assumptions.