Interdependent Durations

27 Pages Posted: 25 Feb 2008

See all articles by Bo E. Honoré

Bo E. Honoré

Princeton University - Department of Economics

Aureo de Paula

University College London - Department of Economics

Abstract

This paper studies the identification of a simultaneous equation model where the variable of interest is a duration measure. It proposes a game theoretic model in which durations are determined by strategic agents. In the absence of strategic motives, the model delivers a version of the generalized accelerated failure time model. In its most general form, the system resembles a classical simultaneous equation model in which endogenous variables interact with observable and unobservable exogenous components to characterize a certain economic environment. In this paper, the endogenous variables are the individually chosen equilibrium durations. Even though a unique solution to the game is not always attainable in this context, the structural elements of the economic system are shown to be semiparametrically point identified. We also present a brief discussion of estimation ideas and a set of simulation studies on the model.

Keywords: duration, empirical games, identification

JEL Classification: C10, C30, C41

Suggested Citation

Honore, Bo E. and de Paula, Aureo, Interdependent Durations. PIER Working Paper No. 08-007, Available at SSRN: https://ssrn.com/abstract=1097567

Bo E. Honore

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Aureo De Paula (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

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