Conduct Parameter Estimation in Homogeneous Goods Markets with Equilibrium Existence and Uniqueness Conditions: The Case of Log-linear Specification (2407.12422v1)

Abstract: We propose a constrained generalized method of moments estimator (GMM) incorporating theoretical conditions for the unique existence of equilibrium prices for estimating conduct parameters in a log-linear model with homogeneous goods markets. First, we derive such conditions. Second, Monte Carlo simulations confirm that in a log-linear model, incorporating the conditions resolves the problems of implausibly low or negative values of conduct parameters.