Title:      Strategic Interaction and Interstate Crises: A
Fixed-Effects Bayesian Quantal Response Estimator for Incomplete
Information Games

Authors:    Justin Esarey, Subhanan Mukherjee, Will Moore

Entrydate:  2007-07-12 01:45:36

Keywords:   fixed effects, quantal response, crisis bargaining, EITM

Abstract:   Two strategies have been laid out by a growing literature
on how to properly test the hypotheses implied by a theory of
strategic interaction. The first strategy focuses on conventional
comparative statics and the proper specification of standard
statistical models (OLS, logit or probit). The second strategy
requires deriving a novel likelihood function directly from the model
or theory and estimating the parameters with maximum likelihood or
Bayesian methods. Both approaches have largely limited their
attention to games of perfect information, though many important
phenomena are studied using games of incomplete information. This
study develops a statistical model for incomplete information games
that we term the Fixed Effects Bayesian Quantal Response Model. Our
FE-BQRE model, which lies in the domain of the second strategy,
offers three advantages over existing efforts: it directly
incorporates (i) Bayesian updating and (ii) signaling dynamics, and
(iii) it mimics the temporal learning process that we believe takes
place in international politics.

http://polmeth.wustl.edu/retrieve.php?id=700