EconPapers    
Economics at your fingertips  
 

Joint analysis of the discount factor and payoff parameters in dynamic discrete choice models

Tatiana Komarova, Fabio Sanches (), Daniel Silva Junior and Sorawoot Srisuma

Quantitative Economics, 2018, vol. 9, issue 3, 1153-1194

Abstract: Most empirical and theoretical econometric studies of dynamic discrete choice models assume the discount factor to be known. We show the knowledge of the discount factor is not necessary to identify parts, or even all, of the payoff function. We show the discount factor can be generically identified jointly with the payoff parameters. On the other hand, it is known the payoff function cannot be nonparametrically identified without any a priori restrictions. Our identification of the discount factor is robust to any normalization choice on the payoff parameters. In IO applications, normalizations are usually made on switching costs, such as entry costs and scrap values. We also show that switching costs can be nonparametrically identified, in closed‐form, independently of the discount factor and other parts of the payoff function. Our identification strategies are constructive. They lead to easy to compute estimands that are global solutions. We illustrate with a Monte Carlo study and the dataset used in Ryan ().

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.3982/QE675

Related works:
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: https://EconPapers.repec.org/RePEc:wly:quante:v:9:y:2018:i:3:p:1153-1194

Ordering information: This journal article can be ordered from
https://www.econometricsociety.org/membership

Access Statistics for this article

More articles in Quantitative Economics from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2022-12-20
Handle: RePEc:wly:quante:v:9:y:2018:i:3:p:1153-1194