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Identification In Discrete Markov Decision Models

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  • Srisuma, Sorawoot

Abstract

We derive conditions for the identification of the structural parameters in Markov decision model under the assumptions of Rust (1987, Econometrica 55, 999–1033) when the payoff function is parametrically specified. Identification in this class of dynamic problems is difficult to establish since the parameters of interest enter the value function nonlinearly, and the value function is only defined implicitly as a fixed point of some functional equation. We show it is sufficient to verify identification in the pseudomodel, which is more tractable as it is originally designed to reduce the computational burden in the estimation problem, for the identification of the data generating parameter of the underling model. Our results extend naturally to a class of dynamic discrete action games commonly used in empirical industrial organizations.

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  • Srisuma, Sorawoot, 2015. "Identification In Discrete Markov Decision Models," Econometric Theory, Cambridge University Press, vol. 31(3), pages 521-538, June.
    • Handle: RePEc:cup:etheor:v:31:y:2015:i:03:p:521-538_00
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    Cited by:

    1. Schiraldi, Pasquale & Levy, Matthew R., 2021. "Identification of Dynamic Discrete-Continuous Choice Models, with an Application to Consumption-Savings-Retirement," CEPR Discussion Papers 15719, C.E.P.R. Discussion Papers.
    2. Komarova, Tatiana & Sanches, Fábio Adriano & Silva Junior, Daniel & Srisuma, Sorawoot, 2018. "Joint analysis of the discount factor and payoff parameters in dynamic discrete choice games," LSE Research Online Documents on Economics 86858, London School of Economics and Political Science, LSE Library.
    3. Schneider, Ulrich, 2019. "Identification of Time Preferences in Dynamic Discrete Choice Models: Exploiting Choice Restrictions," MPRA Paper 102137, University Library of Munich, Germany, revised 29 Jul 2020.

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