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

  • Muhammet Ali Bas (a1), Curtis S. Signorino (a2) and Robert W. Walker (a3)

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.

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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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This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

Richard D. McKelvey , and Thomas R. Palfrey 1998. Quantal response equilibria in extensive form games. Experimental Economics 1: 941.

Whitney K. Newey , and Daniel L. McFadden 1994. Large sample estimation and hypothesis testing. In Handbook of econometrics, volume 4, ed. Robert F. Engle and Daniel L. McFadden , 2111–245. Amsterdam: Elsevier Science.

Curtis S. Signorino 2002. Strategy and selection in international relations. International Interactions 28(1): 93115.

Curtis S. Signorino , and Ahmer R. Tarar 2006. A unified theory and test of extended immediate deterrence. American Journal of Political Science 50: 586605.

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Political Analysis
  • ISSN: 1047-1987
  • EISSN: 1476-4989
  • URL: /core/journals/political-analysis
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