Some Remarks on CCP-based Estimators of Dynamic Models

17 Pages Posted: 22 Mar 2021 Last revised: 20 Aug 2021

See all articles by Mogens Fosgerau

Mogens Fosgerau

University of Copenhagen

Emerson Melo

Indiana University Bloomington

Matthew Shum

California Institute of Technology

Jesper R.-V. Sørensen

University of Copenhagen

Date Written: May 9, 2021

Abstract

This note provides several remarks relating to the conditional choice probability (CCP) based estimation approaches for dynamic discrete-choice models. Specifically, the Arcidiacono and Miller [2011] estimation procedure relies on the “inverse-CCP” mapping from CCP’s to choice-specific value functions. Exploiting the convex-analytic structure of discrete choice models, we discuss two approaches for computing this, using either linear or convex programming, for models where the utility shocks can follow arbitrary parametric distributions. Furthermore, the inverse-CCP mapping is generally distinct from the “selection adjustment” term (i.e. the expectation of the utility shock for the chosen alternative), so that computational approaches for computing the latter may not be appropriate for computing inverse-CCP mapping.

Keywords: dynamic discrete choice, random utility, linear programming, convex analysis, convex optimization

JEL Classification: C35, C61, D90

Suggested Citation

Fosgerau, Mogens and Melo, Emerson and Shum, Matthew and Sørensen, Jesper Riis-Vestergaard, Some Remarks on CCP-based Estimators of Dynamic Models (May 9, 2021). Economics Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3793008 or http://dx.doi.org/10.2139/ssrn.3793008

Mogens Fosgerau (Contact Author)

University of Copenhagen ( email )

University of Copenhagen, Building 26
Øster Farimagsgade 5
Copenhagen K., DK-1353
Denmark

Emerson Melo

Indiana University Bloomington ( email )

Dept of Economics
100 South Indiana Ave.
Bloomington, IN 47405
United States

Matthew Shum

California Institute of Technology ( email )

Pasadena, CA 91125
United States

Jesper Riis-Vestergaard Sørensen

University of Copenhagen ( email )

Øster Farimagsgade 5, Bygn 26
Copenhagen, 1353
Denmark

HOME PAGE: http://https://sites.google.com/site/jesperrvs

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