This paper considers the estimation problem in dynamic games with finite actions. We derive the equation system that characterizes the Markovian equilibria. The equilibrium equation system enables us to characterize conditions for identification. We consider a class of asymptotic least squares estimators defined by the equilibrium conditions. This class provides a unified framework for a number of well-known estimators including those by Hotz and Miller (1993) and by Aguirregabiria and Mira (2002). We show that these estimators differ in the weight they assign to individual equilibrium conditions. We derive the efficient weight matrix. A Monte Carlo study illustrates the small sample performance and computational feasibility of alternative estimators. Copyright © 2008 The Review of Economic Studies Limited.

This paper studies the identification problem in infinite horizon Markovian games and proposes a generally applicable estimation method. Every period firms simultaneously select an action from a finite set. We characterize the set of Markov equilibria. Period profits are a linear function of equilibrium choice probabilities. The question of identification of these values is then reduced to the existence of a solution to this linear equation system. We characterize the identification conditions.We propose a simple estimation procedure which follows the steps in the identification argument.The estimator is consistent, asymptotic normally distributed, and efficient.We have collected quarterly time series data on pubs, restaurants, coffeehouses, bakeries and carpenters for two Austrian towns between 1982 and 2002. A dynamic entry game is estimated in which firms simultaneously decide whether to enter, remain active, or exit the industry. The period profit estimates are used to simulate the equilibrium behavior under a policy experiment in which a unit tax is imposed on firms deciding to enter the industry.

Limited information is the key element generating price dispersion in models of homogeneous-goods markets. We show that the global relationship between information and price dispersion is an inverse-U shape. We test this mechanism for the retail gasoline market using a new measure of information based on commuter data from Austria. Commuters sample gasoline prices on their commuting route, providing us with spatial variation in the share of informed consumers. Our empirical estimates are in line with the theoretical predictions. We also quantify how information affects average prices paid and the distribution of surplus in the gasoline market.

We study a complete information preemption game in continuous time. A finite number of firms decide when to make an irreversible, observable investment. Upon investment, a firm receives flow profits, which decrease in the number of firms that have invested. The cost of investment declines over time exogenously. We characterize the subgame-perfect equilibrium outcome, which is unique up to a permutation of players. When the preemption race among late investors is sufficiently intense, the preemption incentive for earlier investors disappears, and two or more investments occur at the same time. We identify a sufficient condition in terms of model parameters: clustering of investments occurs if the flow profits from consecutive investments are sufficiently close. This shows how clustering can occur in the absence of coordination failures, informational spillovers, or positive payoff externalities.

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This paper studies in…nite horizon complete information preemption games with N players. We consider a continuous time model where …rms have to choose a point in time at which they seize an opportunity to make an irreversible one-time investment.Upon investment, …rms compete with other …rms that have already invested. Flow pro…ts are declining in the number of investors but the cost of investing declines over time. Our model captures environments such as new product introduction or entry into a growing market. We show that there exists a unique subgame perfect Nash equilibrium outcome. Payo¤s are equalized. Firms' investments can be clustered, although coordination failures are ruled out and investment is rivalrous. Increasing the number of competitors in the investment game does not necessarily accelerate investment. In particular, the …rst investment in the two-player game is a lower bound for the …rst investment in any N-player game with linear Cournot competition.

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Keywords Government policy, state aid, ex-post evaluation, survival, European Union JEL Class C41, D62, D73, G33, G38, H23, L52, L98, O52 * The paper is based on a study with the title "Ex-post evaluation of the impact of restructuring aid decisions on the viability of aided (non-financial) firms" produced within a framework contract with the European Union by a consortium consisting of WIFO (Vienna), ECORYS (Rotterdam), Idea Consult (Brussels), SPI (Coimbra) and ZEW (Mannheim). The opinions expressed are ours only and do not represent the European Commission's official position. The European Commission has the rights to the results of the study which can be downloaded here: http://ec.europa.eu/competition/ publications/reports/kd0116104enn.pdf. We are grateful to the entire project team and the European Commission for helpful discussions in the course of the project. We are further indebted to Wolfgang Briglauer, Dirk Czarnitzki, Martin Hud, Ulrich Laitenberger, Eva Pichler, Christian Rammer, Michael Schröder and Douglas Thompson for helpful remarks on earlier versions of the paper. †