On Efficiency of Methods of Simulated Moments and Maximum Simulated Likelihood Estimation of Discrete Response Models

Abstract

This article considers methods of simulated moments for estimation of discrete response models. It is possible to use the same set of random numbers to simulate the choice probabilities for each individual in the sample. In addition to the method of simulated moments of McFadden, we have considered also maximum simulated likelihood estimation methods. An asymptotic theory for such procedures is provided. The estimators are shown to be consistent and asymptotically normal by the theory of generalized U -statistics. Asymptotic efficiency is discussed. Monte Carlo experiments on the finite sample performance of the estimators are reported.