Comment on "Constrained Optimization Approaches to Estimation of Structural Models"

Fedor Iskhakov; Jinhyuk Lee; John Rust; Bertel Schjerning; Kyoungwon Seo

doi:10.3982/ECTA12605

Comment on "Constrained Optimization Approaches to Estimation of Structural Models"

Fedor Iskhakov, Jinhyuk Lee, John Rust, Bertel Schjerning, Kyoungwon Seo

Research output: Contribution to journal › Article › peer-review

12 Citations (Scopus)

Abstract

We revisit the comparison of mathematical programming with equilibrium constraints (MPEC) and nested fixed point (NFXP) algorithms for estimating structural dynamic models by Su and Judd (2012). Their implementation of the nested fixed point algorithm used successive approximations to solve the inner fixed point problem (NFXP-SA). We redo their comparison using the more efficient version of NFXP proposed by Rust (1987), which combines successive approximations and Newton-Kantorovich iterations to solve the fixed point problem (NFXP-NK). We show that MPEC and NFXP are similar in speed and numerical performance when the more efficient NFXP-NK variant is used.

Original language	English
Pages (from-to)	365-370
Number of pages	6
Journal	Econometrica
Volume	84
Issue number	1
DOIs	https://doi.org/10.3982/ECTA12605
Publication status	Published - 1 Jan 2016
Externally published	Yes

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title = "Comment on {"}Constrained Optimization Approaches to Estimation of Structural Models{"}",

abstract = "We revisit the comparison of mathematical programming with equilibrium constraints (MPEC) and nested fixed point (NFXP) algorithms for estimating structural dynamic models by Su and Judd (2012). Their implementation of the nested fixed point algorithm used successive approximations to solve the inner fixed point problem (NFXP-SA). We redo their comparison using the more efficient version of NFXP proposed by Rust (1987), which combines successive approximations and Newton-Kantorovich iterations to solve the fixed point problem (NFXP-NK). We show that MPEC and NFXP are similar in speed and numerical performance when the more efficient NFXP-NK variant is used.",

keywords = "Dynamic discrete choice, MPEC, NFXP, Newton-Kantorovich algorithm, Structural estimation, Successive approximations",

author = "Fedor Iskhakov and Jinhyuk Lee and John Rust and Bertel Schjerning and Kyoungwon Seo",

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AU - Iskhakov, Fedor

AU - Lee, Jinhyuk

AU - Rust, John

AU - Schjerning, Bertel

AU - Seo, Kyoungwon

PY - 2016/1/1

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N2 - We revisit the comparison of mathematical programming with equilibrium constraints (MPEC) and nested fixed point (NFXP) algorithms for estimating structural dynamic models by Su and Judd (2012). Their implementation of the nested fixed point algorithm used successive approximations to solve the inner fixed point problem (NFXP-SA). We redo their comparison using the more efficient version of NFXP proposed by Rust (1987), which combines successive approximations and Newton-Kantorovich iterations to solve the fixed point problem (NFXP-NK). We show that MPEC and NFXP are similar in speed and numerical performance when the more efficient NFXP-NK variant is used.

AB - We revisit the comparison of mathematical programming with equilibrium constraints (MPEC) and nested fixed point (NFXP) algorithms for estimating structural dynamic models by Su and Judd (2012). Their implementation of the nested fixed point algorithm used successive approximations to solve the inner fixed point problem (NFXP-SA). We redo their comparison using the more efficient version of NFXP proposed by Rust (1987), which combines successive approximations and Newton-Kantorovich iterations to solve the fixed point problem (NFXP-NK). We show that MPEC and NFXP are similar in speed and numerical performance when the more efficient NFXP-NK variant is used.

KW - Dynamic discrete choice

KW - MPEC

KW - NFXP

KW - Newton-Kantorovich algorithm

KW - Structural estimation

KW - Successive approximations

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JO - Econometrica

JF - Econometrica

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ER -

Comment on "Constrained Optimization Approaches to Estimation of Structural Models"

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