Identification of Counterfactuals in Dynamic Discrete Choice Models

Paul Scott, Eduardo Souza-Rodrigues and Myrto Kalouptsidi
Additional contact information
Paul Scott: Toulouse School of Economics
Eduardo Souza-Rodrigues: University of Toronto
Myrto Kalouptsidi: Princeton

No 282, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: Dynamic discrete choice models are non-parametrically not identified without restrictions on payoff functions, but counterfactual behavior is sometimes identified even when payoffs are not. We provide necessary and sufficient conditions for the identification behavior and welfare for a broad class of counterfactuals. These conditions are easily checked and can be used to establish the identification (or non-identification) of virtually every counterfactual in the dynamic discrete choice literature. We illustrate the theoretical findings with a numerical model of a monopolist's entry/exit problem and an empirical model of agricultural land use. For each application, we provide relevant examples of both identified and non-identified counterfactuals.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:282

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