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Statistical Backwards Induction: A Simple Method for Estimating Recursive Strategic Models

Published online by Cambridge University Press:  15 October 2007

Muhammet Ali Bas ,
Curtis S. Signorino  and
Robert W. Walker
Muhammet Ali Bas*
Affiliation:
Department of Government, Harvard University, CGIS N209, 1737 Cambridge Street, Cambridge, MA 02138
Curtis S. Signorino
Affiliation:
303 Harkness Hall, Department of Political Science, University of Rochester, Rochester, NY 14627, e-mail: [email protected]
Robert W. Walker
Affiliation:
Department of Political Science, Center for Applied Statistics, Washington University in Saint Louis, Campus Box 1063, One Brookings Drive, St. Louis, MO 63130, e-mail: [email protected]
*
e-mail: [email protected] (corresponding author)
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Abstract

We present a simple method for estimating regressions based on recursive extensive-form games. Our procedure, which can be implemented in most standard statistical packages, involves sequentially estimating standard logits (or probits) in a manner analogous to backwards induction. We demonstrate that the technique produces consistent parameter estimates and show how to calculate consistent standard errors. To illustrate the method, we replicate Leblang's (2003) study of speculative attacks by financial markets and government responses to these attacks.

Type
Research Article
Information
Political Analysis , Volume 16 , Issue 1 , Winter 2008 , pp. 21 - 40
Copyright
Copyright © The Author 2007. Published by Oxford University Press on behalf of the Society for Political Methodology 

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Footnotes

Authors' note: Our thanks to Kevin Clarke, John Londregan, Jeff Ritter, Ahmer Tarar, and Kuzey Yilmaz for helpful discussions concerning this paper. A previous version was presented at the 2002 Political Methodology Summer Meeting.

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