Structural Estimation of Continuous Choice Models: Evaluating EGM and MPEC

TY - JOUR

T1 - Structural Estimation of Continuous Choice Models

T2 - Evaluating EGM and MPEC

AU - Jørgensen, Thomas Høgholm

N1 - JEL classification: C61

PY - 2013/6

Y1 - 2013/6

N2 - In this paper, I evaluate the performance of two recently proposed approaches to solving and estimating structural models: The Endogenous Grid Method (EGM) and Mathematical Programming with Equilibrium Constraints (MPEC). Monte Carlo simulations confirm that both the EGM and MPEC have advantages relative to standard methods. The EGM proved particularly robust, fast and straightforward to implement. Approaches trying to avoid solving the model numerically, therefore, seem to be dominated by these approaches.

AB - In this paper, I evaluate the performance of two recently proposed approaches to solving and estimating structural models: The Endogenous Grid Method (EGM) and Mathematical Programming with Equilibrium Constraints (MPEC). Monte Carlo simulations confirm that both the EGM and MPEC have advantages relative to standard methods. The EGM proved particularly robust, fast and straightforward to implement. Approaches trying to avoid solving the model numerically, therefore, seem to be dominated by these approaches.

KW - Faculty of Social Sciences

KW - Structural estimation

KW - Continuous choice

KW - Endogenous Grid Method (EGM)

KW - Mathematical Programming with Equilibrium Constraints (MPEC)

U2 - 10.1016/j.econlet.2013.02.027

DO - 10.1016/j.econlet.2013.02.027

M3 - Journal article

SN - 0165-1765

VL - 119

SP - 287

EP - 290

JO - Economics Letters

JF - Economics Letters

IS - 3

ER -