Inference in a Synchronization Game With Social Interactions

53 Pages Posted: 25 May 2007

See all articles by Aureo de Paula

Aureo de Paula

University College London - Department of Economics

Date Written: May 2007

Abstract

This paper studies inference in a continuous-time game where an agent's decision to quit an activity depends on the participation of other players. In equilibrium, similar actions can be explained not only by direct influences, but also by correlated factors. Our model can be seen as a simultaneous duration model with multiple decision makers and interdependent durations. We study the problem of determining existence and uniqueness of equilibrium stopping strategies in this setting. This paper provides results and conditions for the detection of these endogenous effects. First, we show that the presence of such effects is a necessary and sufficient condition for simultaneous exits. This allows us to set up a nonparametric test for the presence of such influences which is robust to multiple equilibria. Second, we provide conditions under which parameters in the game are identified. Finally, we apply the model to data on desertion in the Union Army during the American Civil War and find evidence of endogenous influences.

Keywords: duration models, social interactions, empirical games, optimal stopping

JEL Classification: C10, C70, D70

Suggested Citation

de Paula, Aureo, Inference in a Synchronization Game With Social Interactions (May 2007). PIER Working Paper No. 07-017, Available at SSRN: https://ssrn.com/abstract=988997 or http://dx.doi.org/10.2139/ssrn.988997

Aureo De Paula (Contact Author)

University College London - Department of Economics ( email )

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London WC1E 6BT, WC1E 6BT
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