On the use of disequilibrium models in applied microeconomic research and the value of sample separation information

The use of disequilibrium models in applied microeconomic research is evaluated. A disequilibrium or switching regime model is used to explain sales levels of individual retail stores. It is investigated whether substantial differences are found if an equilibrium approach is followed instead. Disequilibrium models are known to suffer from the fact that sample separation is unknown. Usually this information is not available. Our sample contains explicit information with respect to the regime to which an observation belongs. Therefore, the value of sample separation information in estimating the disequilibrium model is investigated. Finally, Monte Carlo experiments are conducted to get more insight into these matters.