Simula@BI seminar: Elia Lapenta

Abstract

We provide a test to check if the distribution of the observed data can be rationalized by a unique Bayesian-Nash equilibrium of a binary game with incomplete information, where agents' types can be mutually correlated. The hypothesis tested is often imposed in game-theoretical models and is key to identify the fundamentals of the game. The game structure is nonparametrically specified. To control the estimation bias, we construct our test statistic by twicing kernels. Since the null asymptotic distribution of the statistic depends on unknown features of the data, we obtain the critical values by a novel multinomial bootstrap and prove its validity. This scheme resamples the observations by imposing that a unique Bayesian-Nash equilibrium is played. A Monte Carlo experiment shows the good small-sample performance of the test.

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