Skip to main content
SpringerLink
Log in

Comments on “identification and semiparametric estimation of a finite horizon dynamic discrete choice model with a terminating action”

  • Published:
Quantitative Marketing and Economics Aims and scope Submit manuscript

Abstract

Bajari et al. (Quantitative Marketing and Economics, 14(4), 271–323, 2016) showed conditions under which the discount factor is identified in a finite horizon optimal stopping problem. We show that these conditions can be cast as a special case of a class of exclusion restrictions which are relevant for a broader scope of applications, and extend the identification result to both finite horizon and infinite horizon optimal stopping problems under more general exclusion restrictions. We also show how a similar approach gives identification of general discount functions in finite horizon optimal stopping problems. The identification results directly suggest estimators of the discount functions that are easy to compute.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. The discount factor is not restricted to the unit in finite horizon models for the model to be well-defined.

  2. We omit the Euler’s constant as it is just a constant and does not affect any of our analysis.

  3. Hotz and Miller (1993) and Norets and Takahashi (2013) show the value contrasts can be uniquely recovered from the choice data for any absolutely continuous distribution with infinite support.

  4. We have adopted the term ‘exclusion restriction’ from Magnac and Thesmar for restrictions like Eq. 7.

References

  • Abbring, J., & Daljord, O. (2018). Identifying the discount factor in dynamic discrete choice models. Mimeo: University of Chicago.

    Google Scholar 

  • Arcidiacono, P., & Miller, R.A. (2011). Conditional choice probability estimation of dynamic discrete choice models with unobserved heterogeneity. Econometrica, 79 (6), 1823–1867.

    Article  Google Scholar 

  • Arcidiacono, P., & Miller, R.A. (2018). Identifying dynamic discrete choice models off short panels. Cambridge: Working paper.

    Google Scholar 

  • Bajari, P., Chu, C.S., Nekipelov, D., Park, M. (2016). Identification and semiparametric estimation of a finite horizon dynamic discrete choice model with a terminating action. Quantitative Marketing and Economics, 14(4), 271–323.

    Article  Google Scholar 

  • De Groote, O., & Verboven, F. (2019). Subsidies and myopia in technology adoption: Evidence from solar photovoltaic systems. Forthcoming american economic review.

  • Fang, H., & Wang, Y. (2015). Estimating dynamic discrete choice models with hyperbolic discounting, with an application to mammography decisions. International Economic Review, 56(2), 565–596.

    Article  Google Scholar 

  • Frederick, S., Loewenstein, G., O’Donoghue, T. (2002). Time discounting and time preference: A critical review. Journal of Economic Literature, 40(2), 351–401.

    Article  Google Scholar 

  • Hotz, V.J., & Miller, R.A. (1993). Conditional choice probabilities and the estimation of dynamic models. Review of Economic Studies, 60(3), 497–529.

    Article  Google Scholar 

  • Kalouptsidi, M., Scott, P.T., Souza-Rodrigues, E. (2018). Linear iv regression estimators for structural dynamic discrete choice models. Working paper: Harvard University.

    Book  Google Scholar 

  • Lee, R. (2013). Vertical integration and exclusivity in platform and two-sided markets. American Economic Review, 103(7), 2960–3000.

    Article  Google Scholar 

  • Magnac, T., & Thesmar, D. (2002). Identifying dynamic discrete choice processes. Econometrica, 70, 801–816.

    Article  Google Scholar 

  • Norets, A., & Takahashi, S. (2013). On the surjectivity of the mapping between utilities and choice probabilities. Quantitative Economics, 4, 149–155.

    Article  Google Scholar 

  • O’Donoghue, T., & Rabin, M. (1999). Doing it now or later. American Economic Review, 89(1), 103–124.

    Article  Google Scholar 

  • Phelps, E., & Pollak, R.A. (1968). On second-best national saving and game-equilibrium growth. Review of Economic Studies, 35(2), 185–199.

    Article  Google Scholar 

  • Rust, J. (1987). Optimal replacement of GMC bus engines: An empirical model of Harold Zurcher. Econometrica, 55, 999–1033.

    Article  Google Scholar 

  • Rust, J. (1994). Structural estimation of Markov decision processes. In Engle, R., & McFadden, D. (Eds.) Handbook of econometrics, (Vol. 4 pp. 3081–3143). Amsterdam: North-Holland.

  • Strotz, R.H. (1955). Myopia and inconsistency in dynamic utility maximization. Review of Economic Studies, 23(3), 165–180.

    Article  Google Scholar 

Download references

Acknowledgments

Park gratefully acknowledges the support provided by the National Research Foundation of Korea (NRF) Grant 2018S1A5A2A01029529.

Author information

Authors and Affiliations

  1. Booth School of Business, University of Chicago, 5807 South Woodlawn Avenue, Chicago, IL, USA

    Øystein Daljord

  2. Departments of Economics and Computer Science, University of Virginia, 254 Monroe Hall, Charlottesville, VA, USA

    Denis Nekipelov

  3. Department of Economics, Ewha Womans University, 52 Ewhayeodaegil, Seoul, Korea

    Minjung Park

Authors
  1. Øystein Daljord
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Denis Nekipelov
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Minjung Park
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Minjung Park.

Additional information

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Daljord, Ø., Nekipelov, D. & Park, M. Comments on “identification and semiparametric estimation of a finite horizon dynamic discrete choice model with a terminating action”. Quant Mark Econ 17, 439–449 (2019). https://doi.org/10.1007/s11129-019-09210-w

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11129-019-09210-w

JEL Classification

Search

Navigation