Abstract

https://ssrn.com/abstract=2700773
 


 



Duality in Dynamic Discrete Choice Models


Khai Xiang Chiong


USC Dornsife Institute for New Economic Thinking

Alfred Galichon


NYU, Department of Economics and Courant Institute

Matthew Shum


California Institute of Technology

May 2015


Abstract:     
Using results from convex analysis, we investigate a novel approach to identification and estimation of discrete choice models which we call the “Mass Transport Approach” (MTA). We show that the conditional choice probabilities and the choice specific payoffs in these models are related in the sense of conjugate duality, and that the identification problem is a mass transport problem. Based on this, we propose a new two-step estimator for these models; interestingly, the first step of our estimator involves solving a linear program which is identical to the classic assignment (two-sided matching) game of Shapley and Shubik (1971). The application of convex-analytic tools to dynamic discrete choice models, and the connection with two-sided matching models, is new in the literature.

Number of Pages in PDF File: 42


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Date posted: December 9, 2015  

Suggested Citation

Chiong, Khai Xiang and Galichon, Alfred and Shum, Matthew, Duality in Dynamic Discrete Choice Models (May 2015). Available at SSRN: https://ssrn.com/abstract=2700773 or http://dx.doi.org/10.2139/ssrn.2700773

Contact Information

Khai Xiang Chiong
USC Dornsife Institute for New Economic Thinking ( email )
United States
Alfred Galichon
NYU, Department of Economics and Courant Institute ( email )
269 Mercer Street, 7th Floor
New York, NY 10011
United States
Matthew Shum (Contact Author)
California Institute of Technology ( email )
Pasadena, CA 91125
United States
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