Dirichlet Processes for Quantal Response Equilibrium Models: Examination of Pegged Exchange Rate Policies

• Activity Number: 536
• Type: Contributed
• Date/Time: Wednesday, August 4, 2010 : 10:30 AM to 12:20 PM
• Sponsor: Section on Bayesian Statistical Science
• Author(s): Anton H. Westveld*+ and Kevin M. Quinn
• Companies: University of Nevada at Las Vegas and University of California, Berkeley School of Law
• Keywords: Bayesian semi-parametric estimation ; multi-agent choice ; pegged exchange rate policies ; quantal response equilibrium ; social interaction data

Abstract

Continuing the work of Quinn and Westveld 2009, we further develop semi-parametric Bayesian approaches for a particular class of strategic choice models - quantal response equilibrium (McKelvey & Palfrey 1995, McKelvey & Palfrey 1996, McKelvey & Palfrey 1998 and Signorino 1999). In particular, we consider modifications of the centrally standardized finite approximation to the Dirichlet process prior of Newton, Czado, & Chappell 1996, in order to accommodate both dynamic and simultaneous strategic choice models in observational and experimental data settings. We apply the methodology to examine the strategic decision processes of governments with pegged exchange rates in relation to speculative currency attacks based on data available from Leblang 2003.