MAXIMUM SCORE ESTIMATION OF DISEQUILIBRIUM MODELS AND THE ROLE OF ANTICIPATORY PRICE-SETTING

In this paper, a general model of disequilibrium quantity determinatio n under median regression assumptions is combined with weak assumption s on the price adjustment to yield a consistent maximum score estimato r. In contrast to Sapra (1986), the supply and demand parameters are s eparately identifiable and the estimator employs all of the observed d ata. The price adjustment assumptions can be motivated by the anticipa tory pricing model of Green and Laffont (1981). In contrast to the Gre en-Laffont model, however, our assumptions only require that long-run Walrasian prices have positive probability. As an illustrative applica tion, maximum score estimates of a model of the US commercial loan mar ket are computed and compared to maximum likelihood estimates. Monte C arlo results are also reported. (C) 1998 Elsevier Science S.A. All rig hts reserved.