Swapping the Nested Fixed Point Algorithm: A Class of Estimators for Discrete Markov Decision Models

Victor Aguirregabiria () and Pedro Mira ()
Additional contact information
Pedro Mira: CEMFI, Casado del Alisal, Madrid, Spain

Econometrica, 2002, vol. 70, issue 4, pages 1519-1543

Abstract: This paper proposes a new nested algorithm (NPL) for the estimation of a class of discrete Markov decision models and studies its statistical and computational properties. Our method is based on a representation of the solution of the dynamic programming problem in the space of conditional choice probabilities. When the NPL algorithm is initialized with consistent nonparametric estimates of conditional choice probabilities, successive iterations return a sequence of estimators of the structural parameters which we call "K"-stage policy iteration estimators. We show that the sequence includes as extreme cases a Hotz-Miller estimator (for "K"=1) and Rust's nested fixed point estimator (in the limit when "K approaches infinity). Furthermore, the asymptotic distribution of all the estimators in the sequence is the same and equal to that of the maximum likelihood estimator. We illustrate the performance of our method with several examples based on Rust's bus replacement model. Monte Carlo experiments reveal a trade-off between finite sample precision and computational cost in the sequence of policy iteration estimators. Copyright The Econometric Society 2002.

Date: 2002
View citations in EconPapers

Downloads: (external link)
http://www.blackwellpublishing.com/ecta/asp/abstract.asp?iid=4&aid=340&vid=70 link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Swapping the Nested Fixed-Point Algorithm: a Class of Estimators for Discrete Markov Decision Models (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ecm:emetrp:v:70:y:2002:i:4:p:1519-1543

Ordering information: This journal article can be ordered from
http://www.blackwell ... mb.asp?ref=0012-9682

Access Statistics for this article

Econometrica is edited by Stephen Morris

More articles in Econometrica from Econometric Society
Contact information at EDIRC.
Series data maintained by Christopher F. Baum ().