Citation:
Calder-Wang S. The Value of Information: Why You Should Add the Second Order Conditions. Working Paper.
Date Published:
2016Abstract:
When conducting estimation based on agent optimization, we show that one can improve the performance of the estimator when information such as the second order condition is appropriately incorporated as moment inequality restrictions, especially when there are weak instruments. We run a simulation study to demonstrate the effectiveness of this approach in both continuous and discrete choice problems, and illustrate to empirical researchers how to include the additional moment inequalities in practice.