Identification of intertemporal preferences in history-dependent dynamic discrete choice models

Pasquale Schiraldi and Matthew R. Levy

No 14447, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the identification of intertemporal preferences in a stationary dynamic discrete decision model. We propose a new approach which focuses on problems which are intrinsically dynamic: either there is endogenous variation in the choice set, or preferences depend directly on the history. History dependence links the choices of the decision-maker across periods in a more fundamental sense standard dynamic discrete choice models typically assume. We consider both exponential discounting as well as the quasi-hyperbolic discounting models of time preferences. We show that if the utility function or the choice set depends on the current states as well as the past choices and/or states, then time preferences are non-parametrically point-identified separately from the utility function under mild conditions on the data and we may also recover the instantaneous utility function without imposing any normalization on the utility across states.

Keywords: Dynamic discrete choice; Identification; Time preferences; Quasi-hyperbolic discounting (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-dcm, nep-ecm, nep-ore and nep-upt
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Citations: View citations in EconPapers (1)

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