Citation

Discussion Paper Details

Please find the details for DP12470 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Identification of Counterfactuals in Dynamic Discrete Choice Models

Author(s): Myrto Kalouptsidi, Paul Scott and Eduardo Souza-Rodrigues

Publication Date: November 2017

Keyword(s): counterfactual, dynamic discrete choice, identification and welfare

Programme Area(s): Industrial Organization and Labour Economics

Abstract: Dynamic discrete choice models (DDC) are not identified nonparametrically. However, the non-identification of DDC models does not necessarily imply non-identification of coun- terfactuals of interest. Using a novel approach that can accommodate both nonparametric and restricted payoff functions, we provide necessary and sufficient conditions for the iden- tification of counterfactual behavior and welfare for a broad class of counterfactuals. The conditions are simple to check and can be applied to virtually all counterfactuals in the DDC literature. To explore the robustness of counterfactual results to model restrictions in practice, we consider a numerical example of a monopolist's entry problem, as well as an empirical model of agricultural land use. In each case, we provide examples of both identified and non-identified counterfactuals of interest.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12470

Bibliographic Reference

Kalouptsidi, M, Scott, P and Souza-Rodrigues, E. 2017. 'Identification of Counterfactuals in Dynamic Discrete Choice Models'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12470