[UTMD-100] Conduct Parameter Estimation in Homogeneous Goods Markets with Equilibrium Existence and Uniqueness Conditions: The Case of Log-linear Specification (by Yuri Matsumura, Suguru Otani)

Yuri Matsumura, Suguru Otani

We propose a constrained generalized method of moments (GMM) estimator with some equilibrium uniqueness conditions for estimating the conduct parameter in a log-linear model with homogeneous goods markets. Monte Carlo simulations demonstrate that merely imposing parameter restrictions leads to not just inaccurate estimations but also some numerical issues, and adding the equilibrium uniqueness conditions resolves them. We also suggest a formulation of the GMM estimation to further avoid the numerical issues.