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Semiparametric estimation of dynamic discrete choice models

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  • Buchholz, Nicholas
  • Shum, Matthew
  • Xu, Haiqing

Abstract

We consider the estimation of dynamic binary choice models in a semiparametric setting, in which the per-period utility functions are known up to a finite number of parameters, but the distribution of utility shocks is left unspecified. This semiparametric setup differs from most of the existing identification and estimation literature for dynamic discrete choice models. To show identification we derive and exploit a new recursive representation for the unknown quantile function of the utility shocks. Our estimators are straightforward to compute, and resemble classic closed-form estimators from the literature on semiparametric regression and average derivative estimation. Monte Carlo simulations demonstrate that our estimator performs well in small samples.

Suggested Citation

  • Buchholz, Nicholas & Shum, Matthew & Xu, Haiqing, 2021. "Semiparametric estimation of dynamic discrete choice models," Journal of Econometrics, Elsevier, vol. 223(2), pages 312-327.
    • Handle: RePEc:eee:econom:v:223:y:2021:i:2:p:312-327
    DOI: 10.1016/j.jeconom.2020.01.024
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    Cited by:

    1. Sasaki, Yuya & Takahashi, Yuya & Xin, Yi & Hu, Yingyao, 2023. "Dynamic discrete choice models with incomplete data: Sharp identification," Journal of Econometrics, Elsevier, vol. 236(1).

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    More about this item

    Keywords

    Semiparametric estimation; Dynamic discrete choice model; Average derivative estimation; Fredholm integral operators;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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